Retailers Get a Seasonal Beating

The question now is how much of the softness in sales was driven by consumer belt-tightening, and how much was driven by declining prices, a move toward earlier holiday shopping and a continued shift in spending away from goods and toward services.

Yes, many prices have fallen. The report showed that gasoline-station receipts fell 4.6% in December from a month earlier—not surprising, considering that regular gasoline averaged $3.21 a gallon in December versus $3.80 in November. Without gasoline-station sales, retail sales fell a somewhat more muted 0.8%.

Nor was it just gasoline prices that fell. According to the Labor Department, prices for goods excluding food and energy items fell a seasonally adjusted 0.3% in December from a month earlier, after falling 0.5% in November and 0.4% in October. A dollar certainly doesn’t go as far at the store as it did before the pandemic struck, but it goes farther than it did in the summer.

People also appeared to be doing more of their holiday shopping earlier, point out Bank of America economists, and the adjustment process that the Commerce Department uses to smooth out seasonal shifts has yet to pick this up. Recall that

Amazon.com

held a “Prime Early Access Sale” in October, and that Target and

Walmart

followed suit with sales of their own. In doing so, they might effectively have put their straws in other retailers’ holiday-sales milkshakes even earlier than usual. The three broad retail categories that rely the most on sales in the final two months of the year—department stores, clothing and accessory stores, and electronics and appliance stores—all posted sales declines in November and December.

Finally, as pandemic strains continue to ease, people have been redirecting more of their spending toward services. On this count, though, the news on Thursday wasn’t good: Sales at food services and drinking places—the one services category the retail report includes—fell 0.9% in December from a month earlier. It isn’t clear that this softness has extended to other categories, however. Bank of America economists’ analysis of card spending by their bank’s customers shows that U.S. consumers continue to rotate more spending toward discretionary services such as travel and entertainment.

Even so, what can be said is that Americans are hardly being profligate. The plus side of that is that household balance sheets likely are in good shape, and that people will be better able to weather a recession if it comes. The downside, for retailers, is that the salad days of the pandemic period are decidedly over.

Write to Justin Lahart at Justin.Lahart@wsj.com