One month ago, when looking at the latest Bank of America credit and debit card spending data, we presented something that the retailers knew all too well: US retail spending was plunging:
"in today's follow up report BofA reveals that if one goes off actual credit card spending - which conveniently resolves the debate if one spends online or in brick and mortar stores as it is all funded by the same credit card - the picture is even more dire. According to the bank's credit and debit card spending data, core retail sales (those excluding autos which are mostly non-revolving credit funded) just dropped by 0.2% in November, the first annual decline since the financial crisis!"
To be sure Bank of America desperately tried to mask the overall plunge highlighting one off factors (calendar effects, gas prices, weather) however now that it has released its latest data, it is running out of excuses, and as a result is confused, quite literally. This is the title of its latest piece looking at retail spending paterns based on its credit and debit card data: "Confusingly Cautious Consumer"
This is what it said:
Retail sales ex-autos, based on the BAC aggregated credit and debit card data, were unchanged in December on a mom seasonally adjusted basis. This is a sluggish end to 2015, which is in keeping with the year. As the Chart of the Month shows, retail sales ex-autos were only up 0.8% in 2015 based on the BAC card data and are on track to realize a 1.0% gain in the Census Bureau figures.
The internals were ugly. Here is retail sales ex autos:
- The seasonally adjusted retail sales ex-autos measure from the BAC aggregate card data was unchanged on a mom basis in December.
- We think this is largely a payback from the gain in November. As such, smoothing through the recent monthly swings, we find that retail sales ex-autos on a three-month average inched up 0.1% mom SA.
- We expect a similar pattern with the Census Bureau data and expect the December data to come in weak after the strong gain in November.
Holiday sales were even worse:
"we find that holiday sales based on the BAC data were only up 1.1% yoy in 2015.... This is the slowest pace of holiday sales since 2011, based on the BAC data, suggesting that the consumer was cautious this year despite a supportive economic backdrop. Although it is hard to find a strong correlation with holiday sales and the next year's consumer spending behavior, we believe that the sluggish holiday shopping season in 2015 suggests caution about the consumer outlook this year.
Digging deeper into major spending categories, BofA found that the strongest growth in sales in December, when measured as a mom seasonally adjusted change, was restaurants and drinking places. Which would make sense: after all the US jobs recovery is now one of "waiters and bartenders." On the other end of the spectrum are sales at electronic stores and young adult/teen retailers. Both categories were down sharply in December relative to November, and have been trending lower through the year. As BofA notes, "we continue to see evidence of consumers prioritizing spend on activities and leisure rather than goods."
Finally, the most disturbing trend, one which we first flagged in October, is the ongoing deterioration at luxury retailers, a proxy for upper class spending habits. As the chart below shows, the trend is not your friend.
"Spending at luxury retailers has been declining since the peak in 2011. That said, growth is coming off of exceptionally high levels at the start of the recovery. Our consumer discretionary team suggests that higher income consumer discretionary purchases appeared to hit saturation in 2014/2015."
BofA's conclusion: "While we continue to look for a healthy job market to drive spending, we cannot help but be left feeling cautious."
What, not "optimistically" cautious?
As for your confusion, Bank of America, allow us to resolve it with the correct answer: soaring Obamacare costs, and record rents.