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.