US Dec retail sales plunge as Omicron, shortages curb spending | Business and Economy News

Retail sales fell sharply in December as inflation and shortages at Omicron wiped out consumer spending.

The triple whammy of Omicron, shortages and inflation dealt a heavy blow to US retail sales last month, as the robust US consumer lost some of its spending mojo.

US retail and food services sales fell 1.9 percent in December, according to an advanced estimate by the US Department of Commerce released Friday. This is the biggest drop in 10 months and follows in November when retail sales increased 0.2 percent.

Early Snap is one of the first data reports that capture the impact of the rapidly spreading Omicron variable on the economic recovery in the United States. But some analysts say persistent shortages and fueled price hikes are major factors affecting consumer spending, which drives about two-thirds of US economic growth.

“The 1.9% decline in retail sales in December appears to primarily reflect the continuing impact of higher prices and a decrease in consumption, with a modest impact from the Omicron wave,” Michael Pierce, chief US economist at Capital Economics said in a note. to customers.

December is usually a strong month for retail sales, but the all-important holiday shopping season got off to an early start last year as consumers received the message that supply chain crises can wreak havoc on their gift lists.

“Early holiday shopping caused by supply chain concerns, higher prices and the spread of Omicron led to a sudden contraction in retail sales in December,” said Lydia Borsour, chief US economist at Oxford Economics.

In fact, dismal December data showed that a well-balanced year saw total sales for the 12 months of 2021 rise 19.3 percent over 2020.

But headwinds loom. Omicron has caused a wave of workers asking for patients, as well as canceling flights and events. The virus, combined with high inflation and persistent shortages of materials and workers, is expected to affect growth in the last three months of 2021. Analysts see waning momentum as a downside risk to growth forecasts for the first three months of this year.

“Consumer spending will remain the cornerstone of economic growth this year, but the near-term trajectory will be choppy amid rising Omicron use cases,” Bosor said.

The prices consumers paid for goods and services in December saw their biggest annual increase since 1982. But in a sign that inflation may be set to ease in the coming months, high producer prices eased last month.

Late last year, the Fed shifted its focus away from keeping borrowing costs low to help the US job market recovery and toward keeping a lid on inflation.

At its last meeting of 2021, the Fed said it saw at least three rate hikes to cool inflation this year, and many analysts are now calling for four.

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