Retail sales have been driving the recovery from the pandemic for more than a year, so it’s worrying that there was a greater than expected dip in December retail sales.
We’re told that the economy is “roaring back” under Joe Biden. Indeed, holiday spending actually shattered records. But by the end of December, sales numbers had drifted downward as omicron and supply problems combined to send retail sales numbers off a cliff.
“After a dispiriting holiday season in 2020, most shoppers were absolutely determined to enjoy themselves come what may,” said Neil Saunders, managing director of GlobalData.
Yet data issued by the Commerce Department showed that by the end of December, spending had trailed off sharply enough to catch economists off guard and raise doubts about the sustainability of retail sales in the face of omicron, inflation and persistent shortages of labor and supplies. Retail sales fell a seasonally adjusted 1.9% from November to December.
Spending fell broadly across numerous sectors: Department store sales fell 7%, restaurant 0.8% and online purchases 8.7% compared with November.
A one-month decline isn’t necessarily surprising. But if the downturn continues into 2022, whatever momentum the economy generated at the end of 2021 could be lost and analysts may begin to use the “R” word — “recession” — if it continues.
Many economists expect the caution that consumers displayed last month to carry over into this year and potentially slow the economy. Still, with average hourly pay rising and unemployment rate steadily dropping, analysts say spending and growth could pick up, at least modestly, once omicron fades.
“American consumers closed 2021 on a very sour note,” said Sal Guatieri, senior economist at BMO Capital Markets. “That said, high household savings, strong job growth, and improved confidence once the latest COVID wave crests should put consumers back on a high-spending track in the second quarter.”
Retailers warned for months that their supply chains had become snarled as the nation swiftly emerged from the pandemic recession, and they urged consumers to shop early for their holiday purchases. It appears that many Americans took heed and, in effect, moved up the usual holiday shopping period by a month or so.
Joe Biden appears to be working hard to bring back the stagflation of the 1970s with high inflation, low economic growth, and high unemployment.
Just don’t make me wear bell bottoms again.
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