Tuesday, January 18, 2022

Retail sales declined in December, marking a slowdown in the holiday shopping season.

Retail sales fell 1.9 percent in December, the Commerce Department reported Friday, reflecting a slowdown during an otherwise strong holiday shopping season that began earlier in the year for many consumers.

It was the first decline after four consecutive months of sales growth, although gains in November slowed from October due to a longer holiday shopping season due to product shortages and fears of a rise in prices. As per the report, overall sales from October to December were up 17.1 per cent compared to the same period a year ago.

Beth Ann Bovino, chief US economist at S&P Global, said that although the weak numbers are bound to be a “headline shock”, the broader picture of retail sales has been strong over the past few months.

“This is not a sign of consumer weakness,” said Ms Bovino, who predicted a decline. “Given that households have relatively strong balance sheets with high savings levels and a strong job market with high wages, it seems that consumers are not necessarily closing their pocketbooks. They are taking a brief pause. “

The retail sales report provides a data point on the minds of consumers as a report this week showed inflation climbed to its highest level in 40 years at the end of 2021. Prices have risen as new forms of the coronavirus upended the supply chain. issues and strong consumer demand for the goods. Also, the Omicron wave has caused widespread staff shortages and may have played a role in removing some consumers from stores and holiday gatherings.

Morgan Stanley economists had forecast retail sales growth of 0.4 percent in December. 1 concern for consumers surveyed in November, “no dent in spending plans,” he said in a note last week.

Instead, the holiday shopping season appeared to be breaking records and lower-income consumers were dealing with relatively better purchasing power, the economists wrote. At the same time, he estimated that the Omicron wave spent more on goods rather than services.

The pandemic has continued to shape consumer habits in the United States.

Fewer people shopped in stores this holiday season, even though the Omicron version didn’t become a major threat until December. According to Sensormatic Solutions, retail foot traffic in the United States was down 19.5 percent between November 21 and January 1 compared to 2019. This was a slight improvement from the depth of the pandemic in 2020, when foot traffic was down 33.1 percent in the same period compared to 2019, but a significant change nonetheless.

Credit…Justin Sullivan/Getty Images

As retailers grapple with inflation and supply chain issues, this has given the largest U.S. retailers additional gains. They were already able to stay open during the pandemic while others were closed, from the variety of goods they carry and through initiatives such as curbside delivery.

Mickey Chadha, retail analyst at Moody’s Investors Service, said, “We are talking about Walmart and Target and Costcos, which are big companies. “They have leased their ships and they are bringing in products. They have a lot of power over the vendors to get priority. And they really planned ahead as well.”

At the same time, Mr. Chadha said, they haven’t had to raise their prices as much as smaller retailers, and they’re likely to benefit as low-income consumers look for value to increase their dollars.

“They’re taking market share because they have lower prices than some smaller, weaker retailers and the ability to absorb that hit into margins.”

For example, Costco said on its December earnings call that it believed it was successfully managing the effects of inflation through its relative purchasing power and relationships with vendors. This often meant that Costco and its suppliers were each taking little in the way of price markups, Richard Galanti, the company’s chief financial officer, said on the call.

“We’ve always said that we want to be the last to raise the price and the first to lower the price, assuming that’s what you can do based on these cost increases,” Mr. Galanti said.

Costco also acknowledged that although it struggled with unavoidable supply chain issues, including delayed container arrivals on the West Coast, it “feels great about having it in stock.”

Many other retailers have said supply chain issues cut into their revenue last year, as pandemic-related factory closures in Vietnam and shipping delays kept goods off US shelves and warehouses.

“The holiday was weaker than expected as units arriving in December did not clear through ports in a time frame,” Abercrombie & Fitch chief executive Fran Horowitz told a conference call on Tuesday. “This was out of our control and resulted in a reduction in sales during the peak sales period. In addition to those delayed units, we also experienced renewed COVID-related restrictions globally. ,

Still, some retail executives have said they will have a supply issue rather than a demand issue, especially given the sharp drop in consumer preferences and inflows over the past 18 months. And it is not yet clear whether the price hike is dampening demand, given the quarterly performance.

S&P’s Ms Bovino said she expects consumer spending to remain strong in the short term, especially given the outlook for pricing during the holidays.

“Families seem to forgive retailers for their very high prices,” she said. “It’s been almost two years – they wanted to celebrate.”

Ms Bovino said she expects more selective purchases later this year as savings accounts begin to expire and consumers “remember what prices used to look like.”

January retail sales could also be impacted by shorter store hours and closures as the Omicron wave causes widespread staff shortages across many industries. This data will provide a better picture of how consumers are reacting to inflation.

Nation World News Deskhttps://nationworldnews.com
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