Building Materials stores remain positive for the month, however, and are up 17% year-over-year.

By Manuel Gutierrez, Consulting Economist to NKBA

December saw the third consecutive month of lower retail sales.

Sales at retail stores fell by 0.7% to $541 billion during what is normally the busiest sales month of the year.

The second surge of COVID-19 is having an impact. Sales peaked in September, then fell by a nominal 0.1% in October. The increased number of COVID-19 cases since November has led consumers to be more cautious about going out in public, which may have reduced their retail shopping.

The fall in sales was fairly broad-based, affecting most types of stores. Note that retail sales reported for the purposes of this report reflect sales data at the store level. For example, sales figures for Electronics & Appliances are sales at stores classified as selling mostly those two categories of product. In contrast, electronics and appliances are sold at other types of stores, such as home centers.

Figure 2 shows that despite the overall decline in sales last month, sales for some store types actually grew. The largest increase was at Gas Stations, with sales jumping by 6.6% to $37.8 billion. Other areas with increased sales were Autos, Building Materials and Health stores.

Internet sales, which includes Mail Order, fell almost 6% in December. Their combined sales reached $80.6 billion in the month, and account for 15% of total retail sales.

Compared to the prior year, sales at most store types were higher in 2020. Internet sales lead the pack with a strong 19% gain over the prior year. More relevant to the K&B industry, sales at Building Materials stores registered the second-highest annual increase, 17% above the prior year, though they account for only 7% of total retail sales. This compares with just a 3% annual gain for all retail stores.

The largest component of retail sales are Autos & Parts stores, which account for slightly over one-fifth of sales (21%).

Figure 3 displays monthly sales at Building Materials stores for the last year. The right panel shows annual change in sales.

Category sales rose nearly 1% for the month to reach $38 billion in December. With annual sales growth of 17%, Building Materials has consistently exceeded the overall sales pace since the pandemic began. In fact, in May 2020 alone, the category jumped by 13% over the previous month. Year-over-year, May 2020 Building Materials sales were 19% above the same month of 2019.

Given the recent pattern, it is expected that demand for building materials at the retail store level should remain robust.