The American consumer is definitely back. Retail sales in December rose to $380.9 billion, setting a new all-time high, according to the Census Bureau. While it might be tempting to blame the rise on holiday sales, this number is seasonally adjusted, so we're seeing authentic demand -- not seasonal effects. This is pretty great news, as it indicates that Americans are beginning to feel more comfortable spending, which should help to stimulate the economy and spur more hiring.
Let's start with the historical chart:
December's sales tally slightly eclipsed the previous high set in November 2007 of $380.0 billion. This chart leaves no doubt that there has been a fairly steep upward trend in sales that began in mid-2010. Since June, monthly sales have increased by $19.7 billion, or 5.5%.
Since we now have the full year's worth of data for 2010, here's how it stacks up to other years in the past decade:
In 2010, total retail and food services sales reached $4.51 trillion. As you can see, 2010 was much stronger than 2009; sales rose by 6.6%. Last year was nearly as strong as 2008, but more clearly lower than 2007. This was mostly due to weaker sales earlier in 2010.
December's data also provides the ability to estimate holiday sales. Here's another chart that considers just November and December retail sales, excluding autos, for the past decade:
This appears to indicate that holiday sales may very well have been the strongest ever in 2010. In fact, last year's tally is a fairly significant $19.7 billion more than the old high set in 2007. Holiday sales measured in this way were 7.6% higher in 2010 than in 2009.
Finally, here's a breakdown of sector-specific sales changes from November to December, compared with the prior period:
It's important to keep in mind that these figures are already seasonally adjusted, so don't let thinking about the holidays throw you off. For example, although electronics and appliances were one of the few sectors that saw weaker sales in December, this actually means that sales in that segment were weaker than usual in December compared to what's normal for November. Other sectors where sales declined compared to November included food, clothing, general, and miscellaneous. Meanwhile, gasoline, health care, and auto sales had the biggest gains compared to November.
Overall, December's retail sales report provides a strong dose of optimism. Not only did it show the highest monthly sales tally ever on a seasonally adjusted basis, but it also indicates the best holiday season ever for sales. Despite high the unemployment rate, it looks like most Americans are comfortable enough with their economic circumstances to spend money again. If this continues, it will strengthen the recovery as retailers begin to see consistently rising sales volume.