clearn.png
Tuesday January 18th, 2022 6:19AM

December retail sales slip after a record holiday season

By The Associated Press
Related Articles
  Contact Editor

NEW YORK (AP) — Americans overlooked shortages, spiking prices and uncertainty over the omicron variant to break spending records during the critical holiday shopping season. But figures released Friday show that after spending robustly early in the holiday season, consumers sharply slowed their purchases from November to December.

The National Retail Federation, the nation's largest retail trade group, said that sales surged by a record 14.1% from November and December 2020 to the same months in 2021. Those figures blew away the federation's projections for growth of between 8.5% to 10.5%, and more than tripled the average gain over the past five years of 4.4%.

“After a dispiriting holiday season in 2020, most shoppers were absolutely determined to enjoy themselves come what may,” said Neil Saunders, managing director of GlobalData.

Yet data issued by the Commerce Department showed that by the end of December, spending had trailed off sharply enough to catch economists off guard and raise doubts about the sustainability of retail sales in the face of omicron, inflation and persistent shortages of labor and supplies. Retail sales fell a seasonally adjusted 1.9% from November to December.

Spending fell broadly across numerous sectors: Department store sales fell 7%, restaurant 0.8% and online purchases 8.7% compared with November.

Many economists expect the caution that consumers displayed last month to carry over into this year and potentially slow the economy. Still, with average hourly pay rising and unemployment rate steadily dropping, analysts say spending and growth could pick up, at least modestly, once omicron fades.

“American consumers closed 2021 on a very sour note,” said Sal Guatieri, senior economist at BMO Capital Markets. “That said, high household savings, strong job growth, and improved confidence once the latest COVID wave crests should put consumers back on a high-spending track in the second quarter.”

Retailers warned for months that their supply chains had become snarled as the nation swiftly emerged from the pandemic recession, and they urged consumers to shop early for their holiday purchases. It appears that many Americans took heed and, in effect, moved up the usual holiday shopping period by a month or so.

Commerce Department figure show retail sales jumped 1.8% in October, and on Friday it reported that year-over-year numbers show that retail sales surged 16.9% last month compared with December 2020. For all of 2021, sales spiked 19.3% compared with the previous year.

Some economists caution that the seasonal adjustment of retail sales has been thrown off by the pandemic. Seasonal adjustment is intended to account for the normal spike in shopping in December for the holiday season. This year, though, because many Americans started shopping so early, the seasonal adjustment might have exaggerated any December spending retreat.

Some analysts also suspect that shoppers who waited until the end of the holiday season and didn’t find what they wanted and took a pass or they bought gift cards. That spending won't show up in retail data until those cards are redeemed.

All told, Americans appear to be spending their money differently — and spending more, not less, collectively.

Mastercard SpendingPulse, which tracks all kinds of payments including cash and debit cards, reported late last month that holiday sales surged 8.5% from Nov. 1 through Dec. 24 from a year earlier. That was the fastest such pace in 17 years.

“Consumer spending will remain the cornerstone of economic growth this year, but the near-term path will be choppy amid surging omicron cases," said Lydia Boussour, lead U.S. economist at Oxford Economics. Boussour said she thinks that after a soft patch in the first quarter, spending should rebound in the spring on the strength of strong wage growth and savings.

Stephen Stanley, chief economist at Amherst Pierpoint, agreed, pointing to a robust job market, pent-up demand and “a mountainous pile of extra cash to spend."

“People will spend again once the omicron wave fades," Stanley predicted.

The omicron variant has led to widespread worker shortages with many people calling out sick. And supply shortages have curtailed what goods make it to store shelves. Stores and restaurants have slashed operating hours or remained closed on days when they had previously been open.

This week, Lululemon warned that fourth-quarter sales and profits will likely come in at the low end of its expectations as it grapples with the variant’s fallout.

“We started the holiday season in a strong position but have since experienced several consequences of the omicron variant, including increased capacity constraints, more limited staff availability and reduced operating hours in certain locations," said CEO Calvin McDonald.

And inflation has settled in across almost every level of the economy, forcing the Federal Reserve to no longer characterize rising prices as “transitory.”

Last month, inflation jumped at its fastest pace in nearly 40 years, a 7% spike from a year earlier that is increasing household expenses and biting into wage gains. And the largest price spikes are hitting where Americans canmost feel it, with the cost of homes, cars, clothes and food racing higher.

Raquel Schuttler, who works in fashion sales, says that the surging cost of food has had a psychological impact on her spending everywhere.

The 53-year-old Atlanta resident, who does grocery shopping for her 17-year-old son and her fiancee, used to make intermittent trips to the grocery store in between big shopping trips. Those smaller trips are now costing her roughly $280, instead of $220, she said. She has pulled back on lunches at the mall with friends to avoid the temptation to shop there.

“I am being much more conservative," Schuttler said. “I stopped any kind of going out impulsively.”

______

Follow Anne D’Innocenzio on Twitter. AP Business Writer Christopher Rugaber contributed to this report.

  • Associated Categories: Associated Press (AP), AP National News, AP Online National News, AP Business, AP Business - Economy, AP Business - Personal Finance
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
ACC commissioner says CFP expansion should be put on hold
Atlantic Coast Conference Commissioner Jim Phillips says now is not the time for College Football Playoff expansion
1:23PM ( 10 minutes ago )
Djokovic faces deportation as Australia revokes visa again
Tennis star Novak Djokovic faces deportation again after the Australian government revoked his visa for a second time
1:21PM ( 12 minutes ago )
December retail sales slip after a record holiday season
Americans overlooked shortages, spiking prices and uncertainty over the omicron variant to break spending records during the critical holiday shopping season
1:15PM ( 18 minutes ago )
Associated Press (AP)
UK says there is 'deal to be done' to resolve feud with EU
Britain’s foreign minister has expressed optimism that there is a “deal to be done” to resolve a Northern Ireland trade dispute that has soured the U.K.’s relations with the European Union
12:44PM ( 49 minutes ago )
GOP governors slam COVID limits while setting policy agendas
Republican governors are highlighting their opposition to restrictions that have marked the COVID-19 pandemic even as they seek to move past it and set their agendas for the year
12:29PM ( 1 hour ago )
Stocks fall on Wall Street, head for another weekly loss
Stocks fell in afternoon trading on Wall Street Friday, keeping the major indexes on course for their second weekly decline in a row
12:23PM ( 1 hour ago )
AP Business
Industrial output falls 0.1% unexpectedly amid supply issues
U.S. industrial production fell 0.1% in December, the first decline since September, with weakness in factory output showing that manufacturers are still struggling with snarled supply chains
10:25AM ( 3 hours ago )
Biden nominates 3 for Fed board, including first Black woman
President Joe Biden nominated three people for the Federal Reserve’s Board of Governors, including Sarah Bloom Raskin, a former Fed and Treasury official, for the top regulatory slot and Lisa Cook, who would be the first Black woman to serve on the board
10:05AM ( 3 hours ago )
Banks help lead stocks lower in early trading on Wall Street
Stocks are opening lower on Wall Street Friday, keeping the S&P 500 on course for its second weekly decline in a row
9:50AM ( 3 hours ago )
AP Business - Economy
Insurers, employers start helping more with chronic disease
Insurers and employers are taking a renewed interest in programs that help people deal with chronic _ and potentially expensive _ health problems
10:14AM ( 3 hours ago )
Navient settles predatory student loan claims for $1.85B
Navient, a major student loan servicing company, has settled allegations of abusive lending practices for $1.85 billion
9:32PM ( 16 hours ago )
Mexico's president wants Mexicans to buy Citigroup unit
Mexican President Andrés Manuel López Obrador says he hopes Mexican investors buy the local subsidiary of Citigroup
5:44PM ( 19 hours ago )
AP Business - Personal Finance
ACC commissioner says CFP expansion should be put on hold
Atlantic Coast Conference Commissioner Jim Phillips says now is not the time for College Football Playoff expansion
1:23PM ( 10 minutes ago )
Djokovic faces deportation as Australia revokes visa again
Tennis star Novak Djokovic faces deportation again after the Australian government revoked his visa for a second time
1:21PM ( 12 minutes ago )
Owners to get $42 million for citrus trees Florida destroyed
Sixteen years after their legal battle began, about 18,000 homeowners in central Florida will be paid more than $42 million collectively by Florida’s agriculture agency for destroying their citrus trees during a state effort to eradicate a harmful citrus disease
12:56PM ( 37 minutes ago )
Goodbye 'godsend': Expiration of child tax credits hits home
For the first time in half a year, families on Friday are going without a monthly deposit from the child tax credit
12:49PM ( 44 minutes ago )
White House: Russia prepping pretext for Ukraine invasion
The White House says U.S. intelligence officials have determined a Russian effort is underway to create a pretext for its troops to further invade Ukraine, and Moscow has already prepositioned operatives to conduct “a false-flag operation” in eastern Ukraine
12:49PM ( 44 minutes ago )