AP

December retail sales slip after a record holiday season

Jan 14, 2022, 6:43 AM | Updated: Jan 15, 2022, 2:14 pm

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.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Sen. Tommy Tuberville, R-Ala., listens to a question during a news conference, March 30, 2022, in W...

Associated Press

Tuberville is ending blockade of most military nominees, clearing way for hundreds to be approved

Sen. Tommy Tuberville announced Tuesday that he's ending his blockade of hundreds of military promotions, following heavy criticism.

20 hours ago

An employee works inside the Hanwha Qcells Solar plant on Oct. 16, 2023, in Dalton, Ga. On Tuesday,...

Associated Press

US job openings fall to lowest level since March 2021 as labor market cools

U.S. employers posted 8.7 million job openings in October, the fewest since March 2021, in a sign that hiring is cooling.

21 hours ago

Megyn Kelly poses at The Hollywood Reporter's 25th annual Women in Entertainment Breakfast, Dec. 7,...

Associated Press

The fourth GOP debate will be a key moment for the young NewsNation cable network

By airing the fourth Republican presidential debate, NewsNation network will almost certainly reach the largest audience in its history.

22 hours ago

Lead water pipes pulled from underneath the street are seen in Newark, N.J., Oct. 21, 2021. (AP Pho...

Associated Press

Biden to require cities to replace harmful lead pipes within 10 years

The Biden administration has previously said it wants all of the nation's roughly 9 million lead pipes to be removed, and rapidly.

6 days ago

Facebook's Meta logo sign is seen at the company headquarters in Menlo Park, Calif., on, Oct. 28, 2...

Associated Press

Meta shuts down thousands of fake Facebook accounts that were primed to polarize voters ahead of 2024

Meta said it removed 4789 Facebook accounts in China that targeted the United States before next year’s election.

6 days ago

A demonstrator in Tel Aviv holds a sign calling for a cease-fire in the Hamas-Israel war on Nov. 21...

Associated Press

Hamas releases a third group of hostages as part of truce, and says it will seek to extend the deal

The fragile cease-fire between Israel and Hamas was back on track Sunday as the first American was released under a four-day truce.

11 days ago

Sponsored Articles

...

Dierdre Woodruff

Interest rates may have peaked. Should you buy a CD, high-yield savings account, or a fixed annuity?

Interest rates are the highest they’ve been in decades, and it looks like the Fed has paused hikes. This may be the best time to lock in rates for long-term, low-risk financial products like fixed annuities.

...

Desert Institute for Spine Care

Desert Institute for Spine Care (DISC) wants to help Valley residents address back, neck issues through awake spine surgery

As the weather begins to change, those with back issues can no longer rely on the dry heat to aid their backs. That's where DISC comes in.

...

DAY & NIGHT AIR CONDITIONING, HEATING AND PLUMBING

Importance of AC maintenance after Arizona’s excruciating heat wave

An air conditioning unit in Phoenix is vital to living a comfortable life inside, away from triple-digit heat.

December retail sales slip after a record holiday season