Economic First Look: On the Pulse of the Consumer

 | Jan 12, 2013 | 12:30 PM EST
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  • John C. Williams, President of the San Francisco Fed (nonvoter), speaks, 11:55 a.m. (all times EST)
  • Dennis Lockhart, President of the Atlanta Fed (nonvoter), speaks, 12:40 p.m.
  • Ben Bernanke, Chairman of the Federal Reserve, speaks, 4:30 p.m.


  • Eric Rosengren, President of the Boston Fed (voter), speaks, 8 a.m.
  • Producer Price Index, 8:30 a.m.
  • Retail Sales, 8:30 a.m.
  • Empire State Manufacturing Survey, 8:30 a.m.
  • Narayana Kocherlakota, President of the Minneapolis Fed (nonvoter), speaks, 8:50 a.m.
  • Charles Plosser, President of the Philadelphia Fed (nonvoter), speaks, 9:30 a.m.
  • Business Inventories, 10 a.m.


  • Consumer Price Index, 8:30 a.m.
  • Treasury International Capital (TIC report), 9 a.m.
  • Industrial Production, 9:15 a.m.
  • Housing Market Index, 10 a.m.
  • Narayana Kocherlakota, President of the Minneapolis Fed (non-voter), speaks, 10 a.m.
  • Energy Information Administration Petroleum Status Report, 11 a.m.
  • Beige Book, 2 p.m.
  • Richard Fisher, President of the Dallas Fed (nonvoter), speaks, 6:30 p.m.
  • Narayana Kocherlakota, President of the Minneapolis Fed (nonvoter), speaks again, 8 p.m.


  • Housing Starts, 8:30 a.m.
  • Jobless Claims, 8:30 a.m.
  • Philadelphia Fed Survey, 10 a.m.
  • Dennis Lockhart, President of the Atlanta Fed (nonvoter), speaks, 12:05 p.m.


  • Consumer Sentiment (preliminary University of Michigan measure), 9:55 a.m.

This week will be an extraordinarily busy one. We have data on manufacturing, retail sales, inflation and housing on tap. Also on the docket are a bevy of Federal Reserve speakers. Before we begin our focus on retail sales, remember that with the first Fed meeting of the year come changes to the voting members on the Federal Open Market Committee.

Fed governors always have a vote, as does the chairman, as well as the president of the New York Fed. However, the voting rights for the other regional-bank presidents rotate in a three-year cycle. This year, voting rights will shift to Charles Evans of Chicago; Eric Rosengren of Boston; James Bullard of St. Louis; and Esther George of Kansas City. Out will be Richmond's Jeffrey Lacker (and his perennial dissents), Atlanta's Dennis Lockhart, Cleveland's Sandra Pianalto and San Francisco's John Williams.

So, of this week's speakers, only Eric Rosengren of the Boston Fed -- and, of course, Bernanke -- will have a vote.

Retail-Sales Spotlight

Now let's turn our focus to retail sales. The upcoming report is an important one because it encompasses December, including the holiday shopping season. One thing to remember about this report is that, unlike data from retailers -- like chain-store numbers -- this week's report doesn't just include department stores and mall retailers. It also includes a wide-ranging assortment of many types of businesses, from gas stations to grocery stores and restaurants.

So, for instance, this report can tell us whether customers might have increased their holiday shopping at a clothing store -- but only by cutting back on, say, dining out. In other words, this week's report is a comprehensive economic release, not a look at what might flow into a particular retailer's earnings. Bear in mind that distinction as we look at divergences in data.

First, for overall shopping patterns, consider the MasterCard Advisors' SpendingPulse report. Here, Mastercard tabulates not just sales made with its signature card, but also spending done with other forms of payment. These may include cash, check and credit, or debit cards issued by other payment processors.

MasterCard Advisors reported that, for November and December combined, overall holiday spending rose by just 0.7% from a year earlier (these data are not seasonally adjusted). The report notes that last year, during a similar period, sales grew by 2% year over year.

This report only includes certain subsectors --  apparel, electronics, online, luxury, jewelry and furnishings. These represent about 30% to 35% of total U.S. retail spending, excluding autos. Food, fuel and other significant retail categories are not included in the SpendingPulse Holiday Index.

Focusing just on December and looking at spending more broadly, the report tells us total retail sales, excluding autos, grew by 2.4% year over year. The organization notes that lower spending on gasoline and some holiday related sectors contributed to December's slower growth rate.

Taking out autos and gasoline, retail spending grew at a slightly stronger 2.8% year over year. This is down from total November retail sales growth of 4.5%, excluding auto and gasoline.

By comparison, the Census Bureau -- which tabulates the retail-sales report -- November retail sales climbed 4.7% from the prior year, ex-auto and gasoline, unadjusted for seasonal and other variations. The two reports, therefore, are in the same ballpark range. Of course, this week's headline data is the monthly, not annual, sales percentage change.

According to MasterCard, "The underlying softness of holiday related sectors of retail sales acted as a drag on December's growth rate. However, when examining a broader view of retail, the growth rates show modest improvement."

Kamalesh Rao, director of economic research for MasterCard Advisors, said: "Throughout the year, we had been seeing a sustained, albeit gentle strength to the monthly numbers. This continued into the fourth quarter, which had a strong start, peaking by the third week of October. Then from that time until the end of the year, we saw frequent swings between acceleration and deceleration."

Weather, of course, likely played a role in these swings, as regional variations -- as well as variations within each month -- were evident within the SpendingPulse report. Unlike Census, MasterCard is able to track spending on an intra-month basis, discerning trends from one week to the next.

When we receive the retail-sales report this week, consider that Hurricane Sandy and poor winter weather in the Northeast may have increased volatility of sales in November and December.

Were some sales delayed from one month to the next, making a big swing between sales in those months? Were sales made online instead of at brick and mortar stores? Remember these caveats when evaluating the retail sales results.



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