US retail sales drop; Omicron drag anticipated

- Advertisement -

WASHINGTON- US retail sales dropped by the most in 10 months in December, likely the result of Americans starting their holiday shopping in October to avoid empty shelves at stores.

Economists cautioned against reading the unexpected plunge in retail sales last month reported by the Commerce Department on Friday as a sign of weakness. Consumer spending remains underpinned by huge savings, rising wages as companies scramble for scarce workers as well as soaring household wealth.

Still, the report and news of an unexpected decline in production at factories in December suggested the economy lost momentum at the end of 2021. That trend likely persisted into January amid spiraling COVID-19 infections, driven by the Omicron variant, which have disrupted businesses and schooling.

- Advertisement -

“It is clear that most shoppers heeded the advice to get holiday shopping done early and that, combined with a massive surge in goods spending earlier in the year, conspired to pull sales sharply lower to end the year,” said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina.

Retail sales fell 1.9 percent last month, the largest decline since February 2021, after rising 0.2 percent in November. Economists polled by Reuters had forecast retail sales unchanged. Estimates ranged from as low as a drop of 2.0 percent to as high as a 0.8 percent increase.

Retail sales, which are mostly goods, increased 16.9 percent year-on-year in December. Unadjusted sales rose 10.0 percent last month.

Sales could weaken further in January as Omicron limits consumer traffic to places like restaurants and bars, though some economists expect goods spending to increase as people stay at home. Retail sales are 19.2 percent above their pre-pandemic level. Holiday sales surged 14.1 percent to a record $886.7 billion in 2021, according to the National Retail Federation.

Bottlenecks in the supply chains caused by the pandemic have led to shortages of goods.

The pulling forward of sales from December also likely impacted the so-called seasonal factor, the model that the government uses to strip out seasonal fluctuations from the data.

“We do not, therefore, believe that December was a weakening demand story or more cautious behavior by consumers,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

The online sales category was hardest hit by the drag from the seasonal factor, plunging 8.7 percent. Receipts at auto dealerships slipped 0.4 percent. Automobiles remain scarce because of a global semiconductor shortage.

Author

- Advertisement -

Share post: