WASHINGTON–Retail sales declined much further during December 2021 than many analysts had expected, according to new data from the Commerce Department. Rising prices on many goods and services are being cited as the primary culprit.
According to the Commerce Department, monthly sales to close out the year showed a decline of 1.9%, considerably worse than the Dow Jones estimate for just a 0.1% drop. Excluding autos, sales fell 2.3%, a number that also fell well short of expectations for a 0.3% rise.
As CUToday.info reported earlier, the consumer price index rose 0.5% for the month, bringing the year-over-year gain to 7%, the highest since June 1982. Wholesale price also rose, climbing 9.7% in the 12-month period for the biggest calendar-year rise since data was kept going back to 2010.
According to the Commerce data, online spending took the biggest hit as a share of overall spending, with nonstore retailers reporting a plunge of 8.7% for the month. Furniture and home furnishing sales declined 5.5% and sporting goods, music and book stores saw a 4.3% drop.
Surging omicron cases also had an effect on the numbers. Restaurants and bars, which posted a 41.3% annual gain in 2021 to lead all categories, saw a decline of 0.8% for the month. Gas stations were a close second for the year, with a 41% surge in sales, but saw a 0.7% decrease in December as fuel costs moved lower. Gasoline prices fell 0.5% to close out a year when prices at the pump soared 49.6%.
Only two categories saw increases for the month: miscellaneous store retailers, which rose 1.8% and building materials and gardening centers, which posted a 0.9% gain, according to the new numbers.
NAFCU Economist’s Analysis
"Retail sales growth plunged in December on a seasonally-adjusted basis, which likely reflects earlier holiday shopping this year due to fears of shortages," stated Long. “Among sectors, some of the biggest losers in December, including clothing, sporting goods, and department stores, are ones that typically see strong sales at the end of the year. Sales at restaurants declined by a modest 0.8 percent as diners may have been nervous about the Omicron variant. January data will shed more light on the extent to which the holiday season played a role in the weak numbers from December and how much Omicron is weighing on commerce.
“Another contraction in sales would be meaningful, as it would suggest broad easing of demand pressures with particular implications for inflation,” continued Long. "While a March rate hike from the Federal Reserve seems all but certain at this point, the Fed has left open the possibility that later in the year it could opt for faster balance sheet reductions instead of rate hikes if economic conditions weaken or the yield curve flattens.”