Latest Data on Retail Sales

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest data on retail sales.

  • Retail sales squeaked out a small gain in December, rising by only 0.2 percent from the prior month. Cold weather and more precipitation this past December compared to historical norms may have contributed to the sluggish sales. From one year ago, sales were up 4 percent.
  • The national retail vacancy rate will not move down if sales rise at this slow pace. Rent growth, hence, will be difficult. NAR projects a retail vacancy rate of 10.1 percent in 2014, with retail space rents rising by only 2 percent.
  • Recent softness in home sales is causing sales at furniture shops to decelerate. A similar slowdown is occurring at building and garden equipment stores.
  • Employment at retail stores meanwhile has been increasing quite nicely, with a net gain of 381,000 in the past 12 months. But that growth is in jeopardy if retail sales do not accelerate higher.
  • Because consumer spending comprises two-third of the economy, consumer spending growth (supported by job and income growth) is needed to further propel the economy.
  • Spending at jewelry stores, interestingly, is rising at a double-digit pace. The record high stock market is likely causing the high net worth households to visit Tiffany’s on 5th Avenue, which then subsequently forces other high income people to spend conspicuously in order to keep up with the Jones. Though present, the show-off consumption is not that bad in the U.S. given many years of being a high income country. Pretty much everyone has a high-definition TV and a smartphone.
  • Conspicuous spending is most visible today in Moscow. The newly rich need to show they are no longer pretending to get paid (and pretending to work) as occurred in former communist times. Though subway stations in Moscow contain artistic beauty, as if visiting a museum, the newly-rich refuses to take underground transport and are adamant to show off their latest German-made car even through they endure possibly the worst traffic jams in the world. Pedestrians beware: it is common for drivers to view the wide sidewalks as another lane.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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  1. Mr. Yun,
    Do you agree with this article. Personally, I have some heartburn over these predictions. It doesn’t seem to take into account the millennia’s that are as large in numbers as the Boomer’s. Can you offer your prediction?
    Mike Butrum
    Asheville Board of Realtors
    Asheville NC

    A Fed economist’s warning: Senior boomers will reshape housing, economy for years to come
    Senior boomers may sell their single-family homes and move into apartments or condominiums, putting deflationary pressure on house prices.
    Baby boomers have reshaped the landscape over the years, requiring massive school construction when they were children, then bloating the labor force and accelerating innovation during their working years and now triggering a building boom for senior housing.
    Federal Reserve economist Jordan Rappaport says multifamily housing construction will pick up steam over the next several years as older boomers opt for the easier living of a condo, apartment or townhouse vs. a single-family home.
    Rappaport’s prediction, which he describes in an Economic Review article titled “The Demographic shift from single-family to multifamily housing,” has profound implications, from suburban zoning to the demand for furniture and other goods. ( ATTACHED )
    “The projected shift from single-family to multifamily living will likely have many large, long-lasting effects on the U.S. economy,” said Rappaport a senior economist at the Federal Reserve Bank of Kansas City. “It will put downward pressure on single-family relative to multifamily house prices.
    “It will shift consumer demand away from goods and services that complement large indoor space and a backyard towards goods and services more oriented toward living in an apartment,” he said. “The possible shift toward city living may dampen demand for automobiles, highways and gasoline but increase demand for restaurants, city parks and high-quality public transit.
    “Households, firms and governments that correctly anticipate these changes are likely to especially benefit,” Rappaport said.
    Rappoport’s prediction, in my opinion, represents a growing realization among prognosticators that aging boomers will have a significant impact on the economy that doesn’t bode well for those stashing money into the stock market with every paycheck hoping that rising profits and share prices will finance their golden years!