U.S. retail sales plunge in December as Omicron, shortages curb spending Business & Economic News

Retail sales fell sharply in December as Omicron, inflation and shortages weighed on consumer spending.


The triple whammy of Omicron, shortages and inflation hit U.S. retail sales hard last month as the powerful U.S. consumer lost some of its spending magic.

U.S. retail and food service sales fell 1.9% in December, a senior estimate from the Commerce Department showed on Friday. It was the biggest drop in 10 months, following a revised 0.2% rise in retail sales in November.


The early snapshot is one of the first data reports to capture the impact of the fast-spreading Omicron variant on the U.S. economic recovery. But some analysts say persistent shortages and the resulting price hikes are the main factors affecting consumer spending, which drives two-thirds of U.S. economic growth.

“Retail sales plunged 1.9% in December, appearing mostly to reflect the continued impact of higher prices and shortages on consumption, with the Omicron wave having less of an impact,” Micheal Pearce, senior U.S. economist at Capital Economics, said in a note. to customers.


December is usually a strong month for retail sales, but last year’s all-important holiday shopping season kicked off early as consumers learned that supply chain disruptions could wreak havoc on their gift lists.

Lydia Bourssour, chief U.S. economist at Oxford Economics, said: “Retail sales unexpectedly contracted in December due to supply chain concerns, higher prices and the spread of Omicron, leading to early holiday shopping.”

In fact, the dismal December figures make for a healthy year overall, with total 12-month 2021 sales up 19.3% from 2020.


But headwinds are looming. Omicron has sparked a wave of workers calling in sick and canceling flights and events. The virus, along with soaring inflation and continued shortages of materials and workers, is expected to weigh on growth in the final three months of 2021. Analysts see the decline in momentum as a downside risk to growth forecasts for the first three months of the year.

“Consumer spending will remain the cornerstone of economic growth this year, but with the surge in Omicron cases, the short-term path will be choppy,” Boussour said.

Prices consumers paid for goods and services in December Largest annual increase since 1982. But it’s a signal that inflation may moderate, rise in coming months producer prices fall last month.


Late last year, the Fed shifted its focus from keeping borrowing costs low to help the U.S. job market recover to controlling inflation.

The Fed said at its last meeting in 2021 that it expected at least three rate hikes this year to cool inflation, and many analysts are now calling for four.

.