Data released on Wednesday showed retail sales rose in the US below expectations in November, at the slowest pace in four months. Analysts at Wells Fargo point out that despite those numbers, holiday sales are still on track to post a record for the year, but with spending slowing in the final months, “it is not the finish retailers were hoping for.”

Key Quotes: 

“Retail sales rose just 0.3% in November, which was less than half the consensus estimate that was calling for a 0.8% gain. The main story in the November is that higher prices for non-discretionary items, like food and gas, are forcing hard choices for consumers in other areas this holiday season. There is also reason to believe holiday sales were pulled forward to get ahead of supply chain snarls that left retailers worried and consumers frantic to secure their gifts in time for the holidays.”

“We would not rule out some giveback in December. With well-publicized supply-chain issues and aggressive messaging from retailers, shoppers have largely heeded the advice to shop early. The risk is that all that early shopping pulled forward trips that in other years would have happened in December, setting us up for a decline. It is not just pulled-forward demand either. If stores are out of key merchandise, holiday gift cards might take the place of gifts; since those get counted for retail sales when they are redeemed, that could push some spending into January.”

“The one thing everyone is getting this holiday season is inflation, our measure of real holiday sales showed a decline of 0.5% in November⁠—which puts real holiday sales on track to rise roughly 10%. However once things shake out, the nominal year-over-year gain will likely be four to five percentage points higher thanks to inflation.”