Looking for Some Retail Therapy?

Tis the season ... to shop till you drop? The Black Friday shopping rush has begun, with advertisements bombarding airways and inboxes. Accompanying the bells and whistles, retailers are also forecasting whether consumers will feel naughty or nice the day after Thanksgiving-and what this bodes for the industry. However, we remind investors not to get caught up in any short timeframe: What matters more is the longer-term trend, which currently looks fine.

Given Black Friday's reputation as the year's biggest shopping bonanza, retail experts go crazy trying to forecast customers' behavior. This year, some wonder if events like the presidential election will hurt spending. Yet for all the hype, one day doesn't determine the industry's health. Plus, Black Friday is no longer a one-day phenomenon, as US holiday shopping is now more marathon than sprint^[i]- folks even plan for the best days (plural) to buy certain products.

Moreover, from a global perspective, America's Black Friday isn't the only big "one-day" retail event around, either. The UK imported Black Friday relatively recently, and it's already a big deal for our friends across the Atlantic. In China, shoppers recently participated in "Singles' Day" on November 11.^[ii] Started as a lighthearted way to celebrate single life, it is now a huge commercialized production promoted by Western celebrities. This year, Singles' Day generated an astounding $17.8 billion in sales, according to an estimate of China's biggest online retailer, blowing away 2015's $14.3 billion. Or, as one analyst pointed out, China's 11/11 online sales exceed Brazil's total projected 2016 e-commerce sales. Note, we aren't saying this is predictive-again, no single day^[iii] indicates future trends. But a mega shopping frenzy is inconsistent with the ever-feared hard landing. If China were truly in trouble, it seems unlikely young folks would fork over nearly $18 billion in one day. Similarly, if political events or aging expansions really endangered consumers in the US and UK-as some have argued-retailers wouldn't be gearing up for a shop-till-you-drop mania, and industry experts wouldn't be anticipating a pickup in holiday shopping from last year.

As ever, though, the trend is more important than any one day or month. The October US retail sales report, released Tuesday, shows spending is chugging along. Sales rose 0.8% m/m, extending September's pickup, and October's 4.3% y/y growth was the fastest in two years. Gas station sales-long sagging and dragging down headline sales thanks to plunging oil prices over the past two years-posted their first year-over-year gain since May 2014, before oil's slide. Nonstore retailers' sales (1.5% m/m, 12.9% y/y) continued accelerating, with October marking the seventh straight double-digit year-over-year rise-a sign of shifting consumer preference.

One important reminder: For all the press retail sales get, they aren't complete consumer snapshots since they exclude most services spending-a sizable portion of overall spending. But notwithstanding that caveat, retail sales' long-term trend shows this segment of consumer spending seems solid overall. (Exhibit 1)

Exhibit 1: US Retail Sales Over the Past Three Years

Source: US Census Bureau, as of 11/16/2016.

Steadily rising retail sales aren't a US-only phenomenon, either. Last week, the British Retail Consortium, which uses a survey-based model, said total retail sales rose 2.4% y/y in October. Official data from the Office for National Statistics painted a similarly positive picture, with retail sales volumes up a robust 1.9% m/m (7.4% y/y): the fastest annual pace in 14 years. October Chinese retail sales grew 10.0% y/y, slower than September's 10.7% but still double digits. Beyond the global economy's heaviest hitters, retail sales^[iv] in eurozone members Germany (0.4%), Spain (3.6%) and the Netherlands (1.1%) were all up. Folks also shopped in the Czech Republic (4.4%) and Hungary (5.1%). Even the city-state of Singapore got into the act, with sales rising 2.0%. So as you start preparing for your Black Friday shopping-or a nice post-Thanksgiving hike instead-don't get caught up in the headlines projecting various single-day figures. Retail is much bigger than its flagship day.