Skip to main content

The State of the Consumer as We Near 2021

January 1, 2021

Despite alarming news headlines, the consumer is not in as bad a position as one would think. Catch our newest TrendsTalk episode with ITR Senior Forecaster Connor Lokar to learn more.



Follow Us

SoundCloud   •  Spotify  •   iTunes   •   YouTube

← Back to list of episodes.

Transcript by Rev

Hello, everyone. Happy holidays. And thank you for joining this latest ITR TrendsTalk. I'm Connor Lokar, senior forecaster here at ITR. And today we're going to be talking about, why the consumer is not quite in as bad of shape as you might think. Now, this conversation stems from some recent headlines relating to the November retail sales data point in the US, and some of those headlines were borderline apocalyptic, and ITR doesn't have quite as negative a view out there as that. To be fair, the November data point, it was not tremendous. It did decline from the October level, falling 1.3% from October 2020 reading. And a decline in retail sales in November is generally atypical for the month. Normally we see as the fourth quarter progresses a seasonal riding cadence, but it's not without precedent. In fact, we've actually seen a negative month to month move in retail sales from October to November six other times since 1990.

Now, enter 1990 as the line in the [inaudible 00:01:12] there for the data I want to examine, post 1990s, generally recent for a lot of folks. So we actually see about 20% of the time there is a negative reading there for November. So not typical, not average, was below average, but not without precedent. The most recent and severe instance of October to November decline was in November, 2008, when we saw retail sales decline 4.1% from the October level when retail sales actually descended into a recessionary trend. We do not anticipate a similar performance for retail sales in this cycle. In fact, in the other five instances, so if we look at the other five of the six, excluding November 2008, the other five instances of a negative month to month move for retail sales in November since 1990, we actually saw retail sales bounce back into a phase B accelerating trend thereafter in December and that's precisely what we expect this cycle.

Some other reasons that we're optimistic, first and foremost, November retail sales were actually above November 2019's levels, which that fact I think got lost in the wash a little bit for several folks. I mean, that's a notable contrast from 2008, for example, when retail sales were actually down double digits from the November 2007 readings. So, when we look at the economy at this time last year, particularly on the consumer side, it was a categorically healthy economy in November 2019. So, for the consumers to actually be spending more in the United States, more in November 2020 than November 2019, that's something to celebrate. Additionally, we saw the US total retail sales 3/12 rate of change, for those of you that are ITR followers know that we track those quarterly growth rates very closely. It actually maintained its upward trajectory, and it's still well above the 12/12 rate of change that annualized growth rate.

That's a couple of important checking points for us here at ITR. For both of those to hold up and maintain their upward trajectory despite that November data point is also a region for encouragement. And I'm not done, we have a couple of other data points in our favor as well. First as an analytical response to the quick changing nature of the economy in 2020, we actually adopted a lot more more dynamic, weekly indexes to track for the economy that can keep up with this crazy world that we now find ourselves living in. And a new favorite of ours is the Johnson Redbook weekly retail index, which is, in weekly readings through mid December is holding strong. Is actually up modestly from the same weeks back in 2019. And this is another stark contrast from 2008, when the same weekly metric was much more foreboding in its trend line.

It was actually below zero and sinking deeper into recession. So to see those weekly numbers strictly here in December hold up after that November data point is another check in the positive column for us. And we also have encouraging disposable income data to lean on. Disposable income in the most recent data point available is up 5% from the same month in late 2019, indicating that the consumer still has some gas in the tank. And on that point, we also got encouraging news now that Congress has passed an add on stimulus bill totaling roughly $900 billion. It seems that that has finally gotten over that legislative goal line.

Now, I'll stop short of analyzing the long-term cost and debt implications of this bill, and in the Christmas spirit I'm going to focus on instead on the short-term positives. And early indications and reading on this bill shows that over a quarter trillion dollars within that bill is targeted directly at the consumer, over $160 billion earmarked for direct check payments to many Americans, and then another 120 billion in federal unemployment benefits, both of which should provide that direct jolt to the consumer and really further enhance that stimulus after growth that we expect to shine over and aid the economy in a positive manner in 2021.

So, ITR, we do not see as much consumer coal in the stocking this Christmas as other outlets. And we do not think that this after November data point precludes an ongoing recovery in US gross domestic product in line with our forecast. So, for us as we close out 2020, we think that it's best to try to block out the noise, control what you can control, and really focus on recovering and rebounding conditions for your business in 2021 if you happen to find yourself positively correlated to the US economy. If you don't know if your business positively correlates to the economy, we can certainly help you there. So, thanks again for stopping by, enjoy the holidays, see you on the next one.


Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.