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Retail sales in the United States fell 1.9% in December

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Retail sales in the United States fell 1.9% in December

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Retail sales in the United States fell 1.9% in December as the Omicron variant of Covid-19 and inflation rose, cushioning the end of the holiday shopping season.

December’s sharp decline follows record retail sales that started with a 1.8% gain in October from the previous month. Sales at retail stores, online and in restaurants were up 16.9% in December from the same month a year ago, the Commerce Department said on Friday.

Many holiday shoppers heeded warnings about shipping delays, resulting in much of the season’s usual gains earlier in the year. Sales declined overall across all expense categories in December, with online sales falling sharply by 8.7%.

Electronics stores were down 2.9% from the previous month in December, while furniture and home stores were down 5.5%. Restaurant and bar sales fell 0.8%. Auto dealers registered a decline of 0.7%.

Retail sales are seasonally adjusted, but not adjusted for inflation, so last year’s increases are tempered by historically high inflation. The consumer price index, the main measure of inflation, hit 7% in December, its highest level since 1982.

The robust annual growth of 2021, despite the decline in December, reflects the torrent of consumer spending that followed declining sales the year before during the worst economic time of the Covid-19 pandemic. Retail businesses are not expected to experience the same rate of growth this year, economists say. Consumer savings have fallen from high levels, and the Omicron variant is creating further disruption and driving customers away from restaurants and bars.

“In a normal year, you don’t see sales increasing that much,” said Neil Saunders, managing director of GlobalData Retail, referring to the performance of 2021.

Due to a tight supply chain, some retailers could end up with additional products that they hoped to sell over the holidays but did not receive on time, resulting in discounts, according to the reports. economists. Another factor is expected, further changes in spending from goods to services once the pandemic finally subsides. During the pandemic, consumers spent more on goods while spending on services remained below pre-pandemic levels. By November, before Omicron’s push in the United States, the balance had started to shift to services, with spending on goods increasing 0.1% while spending on services rose 0.9%.

The Covid pandemic has strained global supply chains, causing freight backlogs that have pushed up costs. Today, some companies are looking for longer term solutions to prepare for future supply chain crises, even though these strategies come at a high cost. Photographic illustration: Jacob Reynolds

Several large retailers said this week that Omicron’s push and supply chain disruptions have reduced holiday sales. Lululemon Athletica Inc.

and Abercrombie & Fitch Co.

said their sales would be affected by the disruption.

Lululemon chief executive Calvin McDonald said the company started the holiday season in a strong position, but the Covid-19 surge has limited staff availability, prompting the chain to cut back on store opening hours in some locations. Abercrombie chief executive Fran Horowitz said an unexpected shortage of inventory in key categories due to delays in ports and transportation hurt sales.

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“If we had had the inventory on hand, we could have delivered sales in our previous line,” Ms. Horowitz said.

For Paula Humphrey, general manager of Don’s Garden Shop in Colorado Springs, Colorado, supply chain issues have been both a boon and a challenge. She said the garden center’s sales had been “inflated” since the start of the pandemic, with many customers citing a desire to grow their own food to avoid grocery shortages and inflated prices.

Delays in deliveries have forced her business, which her husband, Don Humphrey, founded more than four decades ago, to adapt. They had difficulty sourcing manufactured garden materials, such as flagstones and fountains, due to high demand and because their flag supplier was unable to employ guest workers from Mexico. , as it usually does.

“This year we’re getting inventory just to have it,” Ms. Humphrey said. “Usually we never order tiles in January. “

Restaurants and bars have struggled to cope with the double whammy of depressed spending on services and high inflation.

John Lincecum, co-founder of Turtle Swamp Brewing in Boston, says the pandemic has damaged his cash flow.


Photo:

Brandon johnson

“The cost of my cans and cereal went up, so I passed it on to the consumer,” said John Lincecum, co-founder of Turtle Swamp Brewing, a brewery and bar in Boston’s Jamaica Plain neighborhood. .

Mr. Lincecum, who has a doctorate in biochemistry and has years of experience in applying for government research grants in his earlier career as an amyotrophic lateral sclerosis researcher, kept the brewery open during the early stages of the process. pandemic with the help of Small Business Administration loans. and subsidies.

While distribution deals with grocers, including Whole Foods Market, as well as restaurants and bars in Massachusetts, helped grow his wholesale business, he said he was counting on the hall’s cash flow. distribution to pay for regular business expenses.

“The ability to have that weekly and monthly cash flow to pay for utilities and bi-weekly payroll is gone,” he said, as customers avoided eating and drinking in person due to of the increase in Covid-19 cases.

Turtle Swamp recently instituted a vaccine mandate for clients, two weeks ahead of Boston’s city-wide mandate, but said clients are unlikely to return in large numbers until the current wave. case calms down a bit and the weather improves.

“The next six months will decide: there will be a wave of bankruptcies,” said Mr. Lincecum. “The little guys can’t go on.”

Write to Gabriel T. Rubin at gabriel.rubin@wsj.com

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Retail sales in the United States fell 1.9% in December

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