BofA Finds Consumer Spending Tumbled In December, Warns Of Disappointing Retail Sales

Tyler Durden's picture

With this week's most important economic data point - this Friday's retail sales - fast approaching, economists are keen for clues if this key datapoint giving insight into the health of the US consumer will maintain the recent outsized spike in favorable and better than expected economic data, or if adversely, it may be a downward inflection point which could have significant implications on the dollar trade as RBC explained earlier. And according to BofA's internal debit and credit card data, always released just ahead of the retail sales report, it looks like it will be the latter.

As Bank of America's chief US economist Michelle Meyer reports, the aggregated BAC credit and debit card data showed that retail sales ex-autos declined 1.0% mom seasonally adjusted in December. "This contrasts with other indicators of consumer strength including reports of a robust holiday shopping season, a rebound in consumer confidence and strong autos sales" according to Meyer.

Actually, based on earnings reports of those companies who have recently closed their quarter, a weak December is precisely what one should expect, further corroborated by JPM's satellite imagery at early December showing empty parking lots (recall: "Satellite Imagery Reveals Sharp Retail Spending Slowdown After The Election") and a plunge in brick and mortar sales, which has been greater than the offsetting pick up in online sales.

This is how the bank's adjusted retail spending data looks when charted.

As BofA notes, "the BAC aggregated card data showed that retail sales exautos declined 1.0% mom SA in December. This reversed the strong gains over the prior few months, leaving the 3- month average growth rate to slow."

Amusingly, while in the past everyone ignored seasonal adjustments when it comes to retail sales (a reconciliation which as we have shown on various occasions, would always undermine the adjusted data), this time it is BofA which tries to justify the weakness with seasonal adjustments. This is how it "justifies" the sharp drop in data:

We think the explanation is that our BAC aggregated card data is biased lower due to our seasonal adjustment process. Note that the Census Bureau uses a similar approach, and therefore, we expect their data to be subject to a similar downward bias.

 

 

The two major holidays in December — Christmas and the New Year — are fixed in terms of the date but not in terms of the day of the week. This year, Christmas Eve and New Year’s Eve both fell on Saturdays. Spending on those dates was much weaker than on a typical Saturday, presumably since people were enjoying the holidays. However, the seasonal adjustment process treated these days like any other Saturday. This suggests that the adjustment process “over-fits” the data and biases the seasonally adjusted figures lower.

 

We think the bias in December should correct in January, translating to strong growth in January. A strong gain in January would support our view that the weakness we are seeing in the data is simply “noise”. However, that means waiting until February 15th for the January data to provide confirmation.

Unless, of course, January data does not rebound, in which case that bank's economists can simply blame the "abnormally cold weather" for the lack of spending, as they have every time over the past three years.  Even so, with that caveat in mind, BofA warns, "since the Census Bureau uses a comparable approach, we think it is prudent to prepare for a similarly negative number in Friday's report."

And while the December, or even January, data may surprise to the up, or downside, due to quirks in seasonal adjustments, reporting, one thing is undisputable: long-term spending trends, especially when it comes to goods and products, continue to deteriorate. Here's BofA:

  • The sector data suggests that consumers continue to spend on experiences, with airlines and lodging spending up impressively over the prior three months. Presumably, consumers are taking trips around the holidays.
  • On the flipside, consumers appear to be spending less on goods, with particular weakness in electronics spending, home goods, and clothing. As we also show in Chart 6, spending at restaurants continues to weaken.

Also, as a result of surging gasoline prices, spending at gasoline stations is rebounding but only due to nominal spending increases. Which means less disposable income available to be spent on other potential purchases. 

And here is the evidence:

Restaurant spending is tumbling

Furniture and home improvement spending has flatlined

Spending on young adult clothing has tumbled.

Spending at food and beverage stores is growing at the lowest rate in 5 years.

 

And finally, luxury spending - that traditionally reserves to the upper middle and higher classes- continues to crash.

So aside from all that, the consumer is doing great.

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knukles's picture

So everybody (Well half of everybody since about 1/2 are happy and 1/2 sad) is now gonna gear up, go out and spend to the high heavens, everything's solved?
People might be more optimistic, but their bank accounts have yet to expand accordingly.
On the other hand, it sure could be worse (Humorous Understatment.)

beemasters's picture

That only confirms my suspicion: those fighting on Black Friday were doing it all for sports and health reasons. Most probably returned all the goods on Saturday. :)

GGuy's picture

I spent all $2000 of my monthly disposable income....just like this month. I guess it didn't help.

MisterMousePotato's picture

I cannot fathom eating at a restaurant more than once, maybe twice, a year.

Food is better at home. Food is cheaper at home. It is more relaxing to eat at home. If one is not pressed for time (viz., stressed out trying to earn money to pay for housing), cooking and even cleaning is a pleasure.

EDIT: Funny. It wasn't more than two or three days ago that I mentioned to my wife that I had not heard a word about holiday sales since the last week or so of November. Even spending as much time as I do here at The Hedge.

abyssinian's picture

Because people are spending a lot of money buying stocks.   And they will continue to buy tons of stocks and push the Dow to 30,000 in few months. Everyone is excited about Trump and want to support the stock market.  Don't believe me? go ask Yellen! 

GreatUncle's picture

Me I am a tightass, credit card paid in full 11th Jan 2017 now if they hand me some free helicopter money I will spend don't worry.

Turning fake paper into material content is like Jesus turning water into wine, I figure they must have been handing out free water way back then and those owning all the wine wanted a trade.

Jon Bong Jovi's picture

As 30+ yr veteran who speaks to retailers in 50 states...Jan sales suck across the board, ex-autos.

Kefeer's picture

Not only can it be worse; it will be much worse moving forward regardless of the PONTUS because we are morally bankrupt and fiscally bankrupt.

 

For since the creation of the world His invisible attributes are clearly seen, being understood by the things that are made, even His eternal power and Godhead, so that they are without excuse, because, although they knew God, they did not glorify Him as God, nor were thankful, but became futile in their thoughts, and their foolish hearts were darkened. Professing to be wise, they became fools ..... Likewise also the men, leaving the natural use of the woman, burned in their lust for one another, men with men committing what is shameful, and receiving in themselves the penalty of their error which was due.  And even as they did not like to retain God in their knowledge, God gave them over to a debased (judged by God as non-functioning) mind, to do those things which are not fitting;   being filled with all unrighteousness....that those who practice such things are deserving of death, not only do the same but also approve of those who practice them.....And do you think this, O man, you who judge those practicing such things, and doing the same, that you will escape the judgment of God? Or do you despise the riches of His goodness, forbearance, and longsuffering, not knowing that the goodness of God leads you to repentance? But in accordance with your hardness and your impenitent heart you are treasuring up for yourself wrath in the day of wrath and revelation of the righteous judgment of God.... but to those who are self-seeking and do not obey the truth, but obey unrighteousness--indignation and wrath, tribulation and anguish, on every soul of man who does evil, of the Jew first and also of the Greek......

dlfield's picture

Why bother excluding auto-sales?  They sucked last month, too (except maybe commercial vehicles/deals).

billwilson2's picture

and so begins the tRump recession/depression. 

knukles's picture

Yeah, but if it happens RIGHT NOW, not somewhere down the road a year or two, then it will be ....

Get ready to make your liberal friends fucking throw up ....

It's Obama's Fault!, Bitchez

(Bitchez is optional)

Y'all remember "It's Bush's Fault!", dontcha, Bitchez?
Hah ha ha ha ha ha

They were unmerciful about it.  Live by the Depends, die by the DependsTurnabout is fair play with these people

youarelost's picture

Bitchez ?  WHat are you spoiled teenager?

 

Everyone knows when a GOP candidate becomes president, the progressives talk down the economy..Don't act surprised

 

 

OregonGrown's picture

I happen to agree with you.... Which is why I bought 4000 more shares of UVXY (2 times VIX) at $6.09 this morning... at it's 52 week low!  

 

 

jmack's picture

you do realize they reverse split that on a regular basis, and you lose money daily on the roll yield?  good luck with the position, but if you hold it for more than 30 days, you will need a black swan crash to get you back to even.

OregonGrown's picture

I do realize those points... thank you for posting for others though!  I could sell tomorrow (based on how the chinese take to trumps comments) but thinking that I am probably going to hold through the first week of earnings as well as trump inaugural.... should be very interesting times for the market... to say the least!

 

European American's picture

CONsumers are still lapping up guns and ammo. That's what probably keeps the curve from nose diving into the abyss.

Yen Cross's picture

  Uhhh, I'm pretty sure we all knew that.

  I guess lowered earnings expectations or the Atlanta Fed. aren't coming to rescue the q-4 reports.

Winston Churchill's picture

Just another cashier at the Sperm Bank.

shimmy's picture

But Trump said everything was awesome and people were spending zillions of dollars because he was going to be president. This data can't be true then!

I'm guessing he won't say he is the cause of this decline like he tries to take credit for everything positive the last 2 months. 

Justin Case's picture

Yoar obviously listening to fake news there son. First of all he's not the POTUS till next week, just to let ya know. The carnage in the economy takes moar than a couple weeks to produce, as does a recovery. It's not like a duracell battery you change in the pink bunny and away he goes. USA Inc. is a big company and nothing happens over night. An oil tanker takes 7 kilometers to stop after the engines go to idle. Merica is a bit bigger than any oil tanker, therefore will take some time to change course.

Are you a snowflake or what.

GreatUncle's picture

You mean a snowflake with a rampant rabbit and energiser batteries ... lol

ne14truth's picture

Why are the people who should know better alwasy surprised that people are broke....its been like a decade I have been hearing about how surprised they always are when spending is down. I live and work in silicon valley, most people still are working and doing ok but everything is so expensive here that no one really has any money left over to by any crap with. We are spending all our money keeping our aging cars running, fixing are aging roofs.....just keeping afloat. There are some people, mostly under 40 who are still getting new cars, moving to bigger houses.....they LOOK good but they are in debt up to their eyes and cash poor. That is the problem around here, people are more worried about how their neighboors think about them then how they are actually doing financially. Everyone looks like they are swimming in money, spend spend spend...but in truth is is all charge charge charge for everything. I know people who charge their groceries and they keep going deeper and deeper into debt. They don't act like charging something is a financial transaction......if its on the card its free! This cannot last, a big day of reconning is coming when all these bills get to be too much and then??? bankrupt, unemployed modern libtards with no clue how to live within their means. Back to moms house for them.

saveUSsavers's picture

Young couples arond here San Diego coastal(within a mile) paying close to $1mil, they're in early 30s, they are NUTS all for show, they have NO FKIN CLUE what value is, paying $400-500 sq ft. Prop tax around $12K/yr for starters.

Rubicon727's picture

Anticipating any positives in these charts is preposterous. In America, where you've got an almost 3d World income gap between the 1% and the rest of us, you'll NEVER see long term positive trends in any US retail, industrials, and employment systems because the 1% have accomplished their goal: full mastery of all finances, politics, and social trends.

Read economic history starting in Europe by the Medici's then the Genoese, etc. Since the 15th century every damned one of these entities saw huge profits & power and then witnessed the inevitable fall. That's where the US of A is right now.  

Herodotus's picture

Walked my local mall this morning.  I usually count the empty storefronts and use it as an economic indicator.  Today, there were the greatest number of vacancies since I began counting in 2008 (a total of 15).  Also, one of the 4 anchor stores, Sears, is now gone and their space is boarded up.

sinbad2's picture

I do the same thing, it's a much more reliable indicator than the Government and their statistical BS.

GreatUncle's picture

+1000

I used to do the same in Liverpool in the UK so it is a global phenomena of counting vacant premises as an indicator of money in the economy. A much better way than listeing to the government fake economic news.

Noticed in 2010 was a big surge after those believign the government bullshit finally gave in and quit.

Picked up a little 2012 - 2013 as people bought into the it is all over now.

2015 climbing back to where it was ...

Justin Case's picture

Seems the polls on whether people plan to spend less that year, prior to Christmas were correct.

Soul Glow's picture

Who the fuck cares.  We all know the house of cards is built on sand.  We all know there never was a recovery.  We all know the artificial demand was created by the Fed pressing keys on their printer to create dollars to buy treasury bonds, mortgage bonds, and whatever bonds they could get their hands on.  We all know all central banks did the same, some even going as far as to buy equity in ETFs and stock - BoJ and SNB.

Who cares what the retail nimber is.  The economy is dead and propped up like Frankenstein's monster.  Soon it will kill its master and take all of finance with it.  Until then we are watching the wheels go round and round. 

GGuy's picture
GGuy (not verified) Soul Glow Jan 11, 2017 7:49 PM

BULLSHIT, the green shoots of Recovery Summer Eight are right around the corner!

donebydoug's picture

This is what happens when retailers give 50% percent off sales at Christmas.   Maybe these folks just screwed up and miss-priced demand, or Amazon is collectively cleaning their clocks?   Hard to believe the consumer stopped spending.  We still live in the USA.

King Tut's picture
King Tut (not verified) donebydoug Jan 11, 2017 7:41 PM

Amazon prices are no better than the regular retailers' prices

GreatUncle's picture

50% percent off sales at Christmas  -wow.

Been 50% off all year round here in the UK.

Just to try and get punters in the door.

wisehiney's picture

Be right and sit tight.

Get paid to wait.

saveUSsavers's picture

don't forget consumer credit Nov up $11bil highest spike for Nov on record, IT'S ALL PLASTIC, LIKE THE FKING AMERICAN PEOPLE

Consuelo's picture

 

 

Didn't you hear...?

 All the manufacturing jobs are coming back.   Ford, Chrysler, Carrier - the list goes on.    Nevermind all of this is just talk for the time being of course - why piss in the punchbowl when everyone is catching the buzz...?   And nevermind that it took 30-odd years of balls-to-the-wall offshoring to arrive at the current state -bah...   It's a new day, and this kind of optimism hasn't been seen since 1980 - and we all know what happened back then (at least according to Rush Limbaugh), right...?

What was old is new again.   Like say, 18% on your money...?  

BBBBBBBBWHWWHWHWHHAHAHAHAHAHAHAHAHAHA...!!!!!!

 

Kefeer's picture

Okay - now we can cross the DOW 20K and keep moving, but we may have a pull back a day or two to get some shorts caught in the snare.

kenny500c's picture

A sinking 10 year bond yield says the number will be soft.

Kefeer's picture

Common sense says the number will be lousy, but irrationality says it is bullish.  We have spent less and less each year in all manner during the holidays because we make the same and have less because of taxes and inflation.

the_second_coming's picture

These prices are high but I cannot sell because we are in a bull market!!!

StagStopa's picture

Down 1% ? Statistical noise. Seeing tons of help wanted signs, fast food, retail, etc. New normal.

Trump, just keep the casino going a few more years. Yes, i know were in for a new robber baron era. I'm almost there.

Roxi

YHC-FTSE's picture

Data on Spending "Growth" is a rather optimistic title considering the charts. Almost all of them look static, tending towards negative from a point in history, 2008, that is widely agreed as one of the worst years, if not worst, in economic history.

That just about trashes all the lies about the "recovery" we've heard from the mainstream media.

wisehiney's picture

$1.2 trill a year

will buy a lot of beer.

Gonna need it when the tax bill comes due.

taketheredpill's picture

 

 

Is the drop in Luxury spending because the wealthy are smart enough to sense a change in the air and are "going to ground", at least as far  as over the top displays of wealth are concerned?

Codwell's picture

How could sales be down after Obama spent 8 years fixing the economy ? 

Could he be mistaken ?