US Retail Sales Disappoint After Posting 1.9% Drop In December

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US retail sales dropped in December amid rising prices, but sales for the full year were far higher than in 2020, when Covid-19 vaccines were not widely available
US retail sales dropped in December amid rising prices, but sales for the full year were far higher than in 2020, when Covid-19 vaccines were not widely available

Americans’ spending on shopping at the end of last year took a blow as more would-be customers decided it was a better option to stay home out of concern over Omicron. 

On Friday, the Commerce Department released its monthly retail sales and found that overall spending on restaurants and shopping tumbled by 1.9%. This finding was more than expected by forecasters, who predicted shopping would take a hit last month but only a smaller 0.9%, nearly half of the final result. 

According to the data, online retail took the biggest hit with spending at restaurants seeing a decline of 0.8%, with nonstore retailers reporting a plunge of 8.7% for the month. Furniture and home furnishing sales followed with a drop of 5.5% and sporting goods, music and book stores saw a 4.3% drop.

There were some winners in the new report like restaurants, which posted a 41.3% annual gain in 2021 to lead all categories though it still experienced a decline of 0.8% in December. In a sign that Americans were hesitant to go out the door to shop, the data shows that gas stations reported a 0.7% decline in sales despite fuel costs moving lower from previous highs.

Rising inflation has been the bane of consumers for several months now. Recently released data for the core inflation found that it rose 7% last year, reaching a high last seen in several decades. Yesterday, data on wholesale goods also surged by 9.7%, the largest calendar-year increase since the data was first calculated in 2010. 

December was also the first month since the Omicron variant of COVID-19 emerged in late November. The virus is considered more contagious than previous variants and it has driven up case numbers and hospitalizations in the weeks since it was first detected in southern Africa. Americans’ reluctance to go outside for shopping or leisure spending may reflect this apprehension.

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