Despite retailers’ best efforts to promote holiday shopping early in the year, November’s Commerce Department data release Wednesday shows November spending was off 1.1% in comparison to the month before as the Wall Street Journal reported. That’s not a significant drop on its own, but to see that in November is atypical. Here’s the Journal’s analysis of that data:
U.S. retail sales, a measure of purchases at stores, restaurants and online, dropped a seasonally adjusted 1.1% in November from the prior month, the Commerce Department said Wednesday. October sales were revised to a decline of 0.1% from an earlier estimate of a 0.3% increase. Sales were up by 4.1% in November when compared with the same month a year ago.
Restaurants, department stores and vehicle dealerships all reported sharp sales declines in November, with clothing and furniture purchases falling. Purchases of groceries and building materials increased, along with online sales.
But 2020 has been anything but typical and this makes forecasting where payment volumes go next very difficult. The pandemic is breaking new levels of infection, causing some retailers to close and shoppers to think twice about venturing out. Today’s report of jobless claims nearly reaching 900,000 was an added gut-punch.
The negatives will be somewhat balanced out by positive news of the rollout of the vaccine plus the more near-term prospect of more Federal stimulus dollars. Not to be all negative here, but I don’t know that these events will create a sharp turnaround. The vaccine will take months to roll out, and even longer for individuals to return to buying habits they had prior to 2020. Also, the stimulus payment is expected to be smaller this time. I suspect that for many, stimulus dollars will be spent paying down bills, not a shopping spree.
TransUnion has been conducting surveys on financial hardship and in their report released on November 30th, has this to say about consumer’s abilities to pay their bills:
“…one in five impacted consumers report they don’t know how they will pay their bills and loans. Twenty-eight percent of lower-income, 15% of middle-income and 5% of higher-income impacted consumers indicate they don’t know how they will pay. Impacted higher-income consumers are more likely to be tapping savings and using credit products to pay bills. They are also more likely to have an accommodation on a bill or loan (52% vs. 25% lower-income). Nearly half of impacted lower-income consumers state they desperately need a stimulus check to get by, versus 23% of impacted higher-income consumers.”
Overview by Sarah Grotta, Director, Merchant Services at Mercator Advisory Group