April 2, 2018
Retail sales is how consumer spending is measured at stores, restaurants, and websites. It reached $5.8 trillion last year, a rise of 4.2 percent, its fastest annual growth rate since 2014. The year ended with an exceptionally strong finish, with gains posted in each of the last four months of 2017. Last year’s holiday season was the strongest since 2010, as strong labor markets and elevated levels of consumer confidence resulted in robust spending. Retail sales for last November and December combined outpaced 2016’s by 5.7 percent and rose at an even faster 6.1 percent rate, excluding spending at eating and drinking establishments. As expected, nonstore retailers (mainly online retailers) grew the fastest, advancing at 12.8 percent, while sales at general merchandise stores grew, but only at 3 percent. Aided in part by post-hurricane rebuilding, sales at building supply stores showed a 10 percent holiday growth spurt. Holiday sales lagged at book stores, sporting goods stores, and hobby stores, with the combined total sales of all three showing only 0.8 percent growth during the last two months of 2017.
The chart below shows select shares of last year’s retail sales by category.
Americans’ ongoing love affair with autos is obvious from the 21 percent of total retail spending allocated to cars, trucks, and parts. Retail customer purchases at grocery stores accounted for 12.5 percent of last year’s purchases, a very important segment because of both its size and the high concentration of corrugated containers and point-of-purchase displays in stores selling food and beverages. Right behind groceries are general merchandise stores, including big-box stores and traditional department stores, which make up 12 percent of retail sales. Sales at food service establishments—including fast food and traditional restaurants as well as bars and taverns—climbed rapidly after the last recession and accounted for 11.8 percent of total retail spending, almost equaling outlays for food and beverages at grocery stores. And, not far behind, nonstore retail sales. While these include catalog purchases, the largest and most rapidly growing component is sales by online retailers, led by Amazon.com. Last year, online sales accounted for 11.8 percent of retail sales—almost as much as spending in grocery stores or general merchandise stores.
Retail sales growth varied considerably from one sector to another last year and may have had a significant impact on independent corrugated and paperboard manufacturers’ volumes last year, depending on which of these sectors boxmakers supplied. The chart shows 2017 annual growth rates for 11 important retail sectors.
As it did during each year since the end of the last recession, the nonstore retailers sector grew most rapidly last year, advancing at 10.4 percent—more than twice as fast as overall retail and food service sales rose.
Building material stores notched the second-fastest growth rate last year. Benefiting from low interest rates since the last recession, as well as repairs needed following last summer’s storms and funded by insurance claims, growth last year reached 8 percent, on the heels of a 5.9 percent year-earlier gain.
Furniture and other home furnishings require a goodly amount of corrugated packaging to protect them from damage in transit. Retail sales in that sector grew faster than did overall retail sales last year, advancing at 4.8 percent, a pace double that recorded in 2016. Last year’s holiday sales spurt of 8.7 percent helped attain annual superior growth.
Independent converters who shipped boxes primarily into the food service industries may have seen less rapid growth last year than a year earlier. Spending in bars and eateries last year slowed considerably from the 6 percent growth rate posted in 2016. 2017 saw growth of only 2.8 percent, narrowly edging out the 2.5 percent annual growth rate at grocery and beverage stores, which compete for share of food spending. Last year’s growth in the off-premises food and beverage market stayed close to its 2.4 percent growth of 2016.
Although general merchandise, clothing, electronics, and bookstores continued to lose sales volume to online retailers, last year showed some improvement over 2016 results, in part from increased online sales by “brick-and-mortar” retailers. Traditional general merchandisers’ sales rose 2.4 percent last year, compared to a 0.8 percent decline a year earlier. Helped by a 6.7 percent increase in last year’s holiday sales, electronics and appliance stores managed to eke out 0.5 percent positive sales, compared to the 3.2 percent decline in 2016.
One final thought to keep in mind when evaluating retail sales is that these data can be volatile from month to month. Also, they do not include spending on most services such as housing and health care, nor are they adjusted for inflation, which would discount the headline results by some 2 percent.
Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or storatre@aol.com.
