Saturday, January 29, 2022

US retail sales early holiday shopping hammers; Omicron Drag Anticipated in January

People carrying shopping bags walk inside the King of Prussia Shopping Mall as shoppers show up early for a Black Friday sale in King of Prussia, Pennsylvania, November 26, 2021.

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  • Retail sales down 1.9 percent in December
  • Core retail sales dropped 3.1%; November Revised Below
  • Manufacturing output dropped 0.3%

WASHINGTON, Jan 14 (Reuters) – US retail sales fell the most in 10 months in December, possibly the result of Americans starting their holiday shopping in October to avoid empty shelves at stores.

Economists cautioned against reading the Commerce Department’s unexpected fall in retail sales last month as a sign of weakness. Huge savings in consumer spending, rising wages as companies scramble for scarce workers as well as increasing household wealth.

Still, reports and news of an unexpected drop in production at factories in December suggested the economy may have lost momentum in late 2021. This trend likely persisted in January amid the spiraling COVID-19 infections driven by Omicron Edition, which has disrupted businesses. and schooling.

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“It is clear that most shoppers heeded the advice to make holiday shopping early and that, with the huge jump in merchandise spending at the beginning of the year, conspired to sharply reduce sales by the end of the year,” Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina.

Retail sales fell 1.9% last month, the biggest drop since February 2021 after rising 0.2% in November. Economists polled by Reuters had forecast retail sales to remain unchanged. Estimates ranged from at least a 2.0% drop to a high of 0.8%.

Retail sales, which are mostly goods, grew 16.9 per cent year-on-year in December. Unadjusted sales increased 10.0% last month.

Sales could weaken further in January as Omicron limits consumer traffic to places like restaurants and bars, although some economists expect goods spending to rise as people stay home. Retail sales are up 19.2% from their pre-pandemic levels. Holiday sales rose 14.1% to a record $886.7 billion in 2021, according to the National Retail Federation.

The disruption in supply chains due to the pandemic has led to a shortage of goods. The so-called seasonality factor was also impacted by the move forward in sales from December, the model the government uses to remove seasonal fluctuations from the data.

“Therefore, we do not believe that December was a story of weaker demand or more cautious behavior by consumers,” said Conrad Dequadros, senior economic advisor at Breen Capital in New York.

The online sales category was the hardest to pull off the seasonal factor, down 8.7%. Receipts at auto dealerships declined 0.4%. Automobiles are scarce due to the global semiconductor shortage.

Motor vehicles may be in short supply for some time. A separate report from the Federal Reserve on Friday helped pull manufacturing output down 0.3% in December from a 1.3% drop in production at automotive plants.

Production at factories grew 0.6 per cent in November. Economists had expected a 0.5% increase in output. read more

Against the backdrop of high inflation, the Fed may still start raising interest rates in March.

“We don’t think today’s reading will have a significant impact on the Fed’s decision to lift rates potentially in March, which will rely more on inflation than activity data,” said Andrew Hollenhorst, chief economist at Citigroup in New York. “The seasonal adjustment factor turns highly positive in January, suggesting that online sales and overall retail sales will pick up strongly.”

Stocks were lower on Wall Street. The dollar rose against a basket of currencies. US Treasury prices fell.

Retail Sales

widespread weakness

Sales at electronics and appliance stores fell 2.9%. Receipts at service stations fell 0.7% as gasoline prices retreated from higher levels seen in previous months. Sales at food and beverage stores fell 0.5%. Sales at clothing stores declined by 3.1%. Sales at sporting goods, hobbies, musical instruments and bookstores also declined.

Furniture store sales fell 5.5%, while receivables at electronics and appliance stores fell 2.9%. But sales from building materials and garden tool suppliers rose 0.9%.

Receipts at restaurants and bars decreased by 0.8%. Restaurants and bars are the only service category in the Retail Sales report. These sales were up 41.3% from last December.

Excluding automobiles, gasoline, building materials and food services, retail sales fell 3.1%. It was also the biggest drop since last February. Data for November was revised lower to reflect a 0.5% decline in these so-called core retail sales, rather than a 0.1% decline as previously reported.

Core retail sales correspond most closely with the consumer spending component of GDP. Economists lowered their fourth-quarter consumer spending forecasts after the data.

December’s weakness puts consumer spending on a lower growth trajectory in the first quarter. Concerns about inflation may also curb spending. A University of Michigan survey showed consumer sentiment fell to the second lowest level in a decade in early January. read more

Gross domestic product growth forecast for the fourth quarter remained bullish on increased inventory accumulation. The fourth report from the Commerce Department showed trade inventories grew a strong 1.3% in November. read more

business list

Goldman Sachs slashed its growth forecast by half a percentage point to 6.5% annualized. The economy grew at a 2.3% pace in the third quarter. Last year’s growth is expected to be the strongest since 1984.

“Consumer spending will continue to be a cornerstone of economic growth this year, but the near-term will be tight in the midst of rising Omicron cases and rising inflation,” said US economist Lydia Bussour, chief US economist at Oxford Economics in New York. “Overall, the combination of strong labor income growth, advanced additional savings and a healthy balance sheet will support consumption growth above the trend of 4% this year.”

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Reporting by Lucia Muticani; Editing by Andrea Ricci

Our Standards: Thomson Reuters Trust Principles.

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