Listening to talking heads and certainly to various retail associations, US consumer spending in December was lackluster driven by such traditional scapegoats as "lack of confidence ahead of the Fiscal Cliff", lack of clarity on taxation, fears about what the market may do, etc. And while retailers certainly did report a very mixed sales report for both November and December, it certainly was not due to lack of spending, at least not according to Gallup [9]. Curiously, and rather inexplicably, the polling organization found that in December the average self-reported daily spending in stores, online, and in restaurants rose by a whopping $10 to $83. This was the highest monthly figure Gallup has reported since December 2008. It is also the first reading above the $80 mark since the 2008-2009 recession. But how is that possible? Wasn't the strawman that nobody would spend due to fiscal and tax uncertainty? Apparently not, and this unleashes merely the latest episode of baffle with BS, where data from one source contradicts directly what has been reported from other aggregators of spending data.
The Gallup charts [9]:
The December data are based on Gallup Daily tracking interviews with more than 13,000 U.S. adults conducted throughout the month.
In each of the last four years, December was the single month with the highest spending average, which is not surprising given the tradition of giving and receiving holiday gifts. The December averages are typically about $10 higher than the average of the prior 11 months combined.
The four-year high in spending in December 2012 follows the trend toward increased spending Gallup has observed over the last four years. As the accompanying table shows, both the January through November and December averages have increased each year since 2009.
Not surprisingly, the biggest jump in spending was among members of the "upper classe", or those making over $90,000, where the average daily spend soared to a 4 year + high of $155. But even the lower income Americans spent more, at $67 per person per day.
Thus, the increase in spending in December was broad-based, with people of varying economic resources spending at least a bit more than they have in recent memory.
That this is confusing is an understatement. As Gallup observes [9]:
Whether the trend toward greater spending continues in 2013 is unclear. Most Americans are seeing a decrease in take-home pay with the expiration of the Social Security payroll tax holiday, but President Barack Obama's and Congress' efforts to avoid the fiscal cliff kept federal income tax rates the same for most Americans.
Some other observations: could the reason for the undocumented surge be that all spending shifting to online? Yes, a big portion is, but the vast bulk of spending still takes places in malls and other retail outlet venues. The same venues that have bitterly complained and scapegoated the Cliff for their recent performance. Could it be that merely everyone is parroting the conventional wisdom, while trying simply to explain away collapsing margins? Is it possible that the retailer bottom line is declining even more despite the holiday shopping season in parallel with flat or even modestly rising revenues? If so, this is a major change from recent years where top line weakness could be masked by SG&A and COGS "efficiencies" and other accounting gimmicks? If so, watch out for the Q1 retail season as it truly be a bloodbath.
Another perfectly logical explanation is that the 13,000 respondents merely fibbed and overestimated their spending by a substantial amount. In a world in which official government data openly contradicts itself, it is certainly possible.
Finally, and perhaps most logical, is that US consumers spent aggressively in December due to the cliff, hoping to lock in prices which many expected would rise in an environment of rising corporate taxes across the board. if so, then December was merely another "cash for [ ]" grab, that pulled much of the 2013 purchasing ahead into 2012, and will result an even weaker start to the 2013 retail season.
Whereas December is usually the strongest month for consumer spending, January is typically one of the weakest, so it is unlikely spending will remain at the higher level reached in December. One key to understanding the trend in consumer spending will be how January 2013 spending compares with prior Januaries. If January 2013 looks strong compared with prior Januaries, it is a sign that the economic momentum is continuing. If it is weaker, it could be a sign that Americans' more generous spending ways may be ending.
Spot on, unless, of course, the spin now is that January comps will be not comparable because consumers will be "leery of spending ahead of the Debt Ceiling fiasco Ver 2.0" (aka the Debtbacle). And then continuing future spending weakness will be blamed on rainy springs, warm summers, cold winters, a tornado in Oklahoma, a butterfly flapping its wings in China and so on, where reality is only as predicted by the Fed's various computer models, and never what reality actually is.