December retail sales drop 1.9% after holiday rush
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NEW YORK – Americans, plagued by lack of product choice, rising prices and the arrival of omicron, slashed spending sharply in December after a surge of early fall purchases boosted this year’s holiday shopping season.
Retail sales fell 1.9% seasonally adjusted in December from November, when sales rose 0.3%, the US Department of Commerce said on Friday. Sales rose 1.8% in October as shoppers worried about product shortages got a head start on their holiday shopping. Still, retail sales jumped 16.9% last month from December 2020, the Commerce Department said on Friday. For 2021 as a whole, sales increased 19.3% from the previous year.
The spending cuts were spread across many areas. Department store sales fell 7%, restaurant sales fell 0.8% and online sales fell 8.7% from the previous month, according to the report.
Omicron was identified by the World Health Organization in late November, and the Commerce Department’s December report is the first to capture some of its effects on consumer behavior.
The monthly retail report only covers about a third of overall consumer spending and doesn’t include money spent on things like haircuts, hotel stays, or plane tickets. , all of which tend to slow down business when anxiety about COVID-19 increases. In November, restaurant sales posted a gain of 1%, the best performance in the sector since July.
Industry analysts suspect that shoppers who waited until the last minute and couldn’t find what they wanted and took a pass or purchased gift cards, would not appear in retail data until these cards are redeemed.
There is also the unique era in which we are living and which has distorted a number of economic indicators. Many economists believe the seasonal adjustment in retail sales has been reversed by the pandemic, which has muddled U.S. spending patterns. The seasonal adjustment is intended to take into account the normal increase in purchases in December for the holiday season. This year, however, due to well-known shortages, Americans started shopping for the holidays early and the seasonal adjustment could have exaggerated any December pullback.
And Americans this year haven’t cut spending. They spend their money differently, but they spend more, not less.
The National Retail Federation is analyzing last month’s sales figures and will release its report on Friday for November and December. The country’s largest retail group forecast record growth of 8.5-10.5 percent, compared to the same two months last year.
Mastercard SpendingPulse, which tracks all kinds of payments including cash and debit cards, reported late last month that holiday sales jumped 8.5% from Nov. 1 to Dec. 24 compared to ‘last year. It was the fastest pace in 17 years.
“Consumer spending will remain the cornerstone of economic growth this year, but the short-term trajectory will be choppy amid the booming Omicron cases,” said Lydia Boussour, chief US economist at Oxford Economics. Boussour believes that after a slump in the first quarter, spending should rebound in the spring due to strong growth in wages and savings.
Stephen Stanley, chief economist at Amherst Pierpoint, agrees, pointing to a strong job market and pent-up demand and “a mountainous pile of extra money to spend.”
“People will spend again once the Omicron wave wears off,” Stanley predicted.
The omicron variant has resulted in a widespread shortage of workers, so people are calling in sick, including the retail industry, and supply shortages have reduced making it possible to stock shelves. Stores and restaurants have reduced their opening hours or remained closed on days they were previously open.
This week, Lululemon warned that fourth-quarter sales and profits would likely be at the low end of his expectations as he grappled with the fallout from the variant.
“We started the holiday season in a strong position, but have since suffered several consequences from the omicron variant, including increased capacity constraints, more limited staff availability and reduced opening hours in some locations,” CEO Calvin McDonald said.
And inflation has taken hold at almost every level of the economy, forcing the Federal Reserve to stop calling price hikes “transient.”
Inflation surged at its fastest pace in nearly 40 years last month, spiking 7% from the previous year, which is pushing up household spending and biting into wage gains. And the biggest price hikes are hitting where Americans can feel it, with the costs of homes, cars, clothing and food rising.
Raquel Schuttler, 53, who works in fashion sales, says soaring food costs have had a psychological impact on her spending everywhere.
The Atlanta resident, who does groceries for her 17-year-old son and fiancee, used to go to the grocery store intermittently between major errands, but those small trips now cost her $ 280, as of today. instead of $ 220. She took out lunches at the mall with friends to avoid the temptation to shop there.
“I am much more conservative,” she said. “I quit all sort of outing on impulse.”
December retail sales drop 1.9% after holiday rush
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