December Retail Sales Lists After Record Christmas Season – Santa Monica Daily Press

ANNE D’INNOCENZIO / AP Retail writer

Americans overlooked shortages, price spikes and uncertainty about the Omicron variant to break spending records during the critical holiday shopping season. However, figures released on Friday show that consumers sharply slowed their November-December purchases after spending hefty at the start of the holiday season.

The National Retail Federation, the country’s largest retail group, said sales rose a record 14.1% from November and December 2020 to the same months in 2021. Those numbers beat the association’s forecasts for growth of between 8.5% and 10.5%. and has more than tripled its average gain of 4.4% over the past five years.

“After a disappointing 2020 holiday season, most shoppers were absolutely determined to enjoy themselves no matter what,” said Neil Saunders, Managing Director of GlobalData.

However, data from the Commerce Department showed that spending by the end of December had fallen sharply enough to catch economists off guard and raise doubts about the sustainability of retail sales amid Omicron, inflation and ongoing labor and inventory shortages. Retail sales fell by a seasonally adjusted 1.9% from November to December.

Spending fell sharply across multiple sectors, with department store sales down 7% compared to November, restaurants down 0.8% and online purchases down 8.7%.

Many economists expect the caution consumers showed last month to carry over into this year, potentially slowing the economy. Still, analysts say spending and growth could pick up at least slightly as average hourly wages rise and the unemployment rate steadily falls once Omicron slows.

“American consumers ended 2021 very sourly,” said Sal Guatieri, senior economist at BMO Capital Markets. “However, strong household savings, strong job growth and improved confidence should put consumers back on a spending trajectory in the second quarter once the recent COVID wave crests are in place.”

Retailers warned for months that their supply chains were faltering as the nation quickly emerged from the pandemic recession, and they urged consumers to do their holiday shopping early. It seems that many Americans have taken heed and have actually brought the usual Christmas shopping period forward by about a month.

Figures from the Commerce Department showed retail sales rose 1.8% in October, and on Friday it reported that year-on-year figures showed retail sales rose 16.9% last month compared to December 2020. For the full year 2021, sales increased by 19.3% compared to the previous year.

Some economists are warning that seasonal adjustment in retail sales has been thrown off by the pandemic. The seasonal adjustment is intended to reflect the normal increase in December purchases for the holiday season. However, because many Americans started shopping so early this year, the seasonal adjustment may have exaggerated any decline in spending in December.

Some analysts also suspect shoppers who waited until the end of the holiday season and didn’t find what they wanted took a pass or bought gift cards. These spends will not appear in retail data until these cards are redeemed.

All in all, Americans seem to spend their money differently — spending more, not less, overall.

Mastercard SpendingPulse, which tracks all types of payments including cash and debit cards, reported late last month that holiday sales from November 1 to December 24 were up 8.5% year over year. That was the fastest pace of its kind in 17 years.

“Consumer spending will remain the cornerstone of economic growth this year, but the short-term path will be bumpy amid rising Omicron cases,” said Lydia Boussour, senior US economist at Oxford Economics. Boussour said she thinks spending should pick up in the spring after a sluggish first quarter, on the back of strong wage growth and savings.

Stephen Stanley, chief economist at Amherst Pierpoint, agreed, citing a robust job market, pent-up demand and “a mountain of extra money to spend.”

“People will start spending again once the omicron wave fades,” predicted Stanley.

The Omicron variant has caused widespread labor shortages as many people have called in sick. And supply shortages have limited what goods make it onto store shelves. Shops and restaurants have reduced their opening hours or remained closed on days when they were previously open.

This week, Lululemon warned that fourth-quarter sales and earnings are likely to be on the lower end of expectations as it grapples with the fallout from the variant.

“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 uptime at certain locations,” said CEO Calvin McDonald.

And inflation has leveled off at almost every level of the economy, forcing the Federal Reserve to no longer characterize rising prices as “temporary.”

Last month, inflation rose at the fastest pace in almost 40 years, up 7% year-on-year, pushing up household spending and hurting wage growth. And the biggest price spikes come where Americans feel it most as the cost of homes, cars, clothing and groceries soar.

Raquel Schuttler, who works in fashion sales, says rising food prices have had a psychological impact on their spending everywhere.

The 53-year-old Atlanta resident, who shops for groceries for her 17-year-old son and fiancé, made occasional trips to the grocery store in between large purchases. Those smaller trips now cost her about $280 instead of $220, she said. She has retired from shopping at the mall with friends to avoid the temptation to shop there.

“I’m a lot more conservative,” Schottler said. “I stopped going out on impulse.”

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

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