At the top of the key year-end holiday shopping season in the U.S., retail sales data unexpectedly fell in December 2020, highlighting the negative impact of the new crown epidemic on growth in the U.S. economy late last year, with consumer spending being the largest component of the U.S. economy.
On Friday, January 15, data released by the U.S. Department of Commerce showed that U.S. retail sales fell 0.7% in December from a year earlier, the third consecutive month of year-over-year cooling, with the previous value in November revised down from 1.1% to 1.4%, and economists had expected December data to be unchanged from a year earlier.
Retail sales excluding autos fell 1.4% MoM in the month, the largest decline since April 2020, compared with expectations for a 0.2% drop. Excluding motor vehicles and gasoline, retail sales fell 2.1% from a year earlier, well above the expected 0.3% decline and the previous 0.8% decline in November.
Excluding motor vehicles, gasoline, construction materials and food services, core retail sales, which are closely related to consumer spending in GDP, fell 1.9% in December from a year earlier, also the largest decline in eight months, a figure that is generally considered more reflective of underlying consumer demand.
Of the 13 retail sales categories, a total of seven declined in December. Among them, sales at auto and parts dealers, which account for about 20 percent of total retail sales, rose 1.9 percent from a year earlier, but retail sales at non-brick-and-mortar stores (i.e., online stores), including Amazon, fell a deep 5.8 percent from a year earlier, and retail sales at food service and eating places fell 4.5 percent from a year earlier.
Meanwhile, retail sales in key categories such as electronics, grocery and department stores all fell sequentially, while home improvement, healthcare and personal care products, apparel and gas stations increased sequentially.
Throughout 2020, unadjusted retail sales in the U.S. rose just 0.6% YoY, the lowest in 11 years since 2009 and a significant decline from the 3.6% YoY increase in 2019.
Financial blog Zerohedge noted that while both nominal and core retail sales remained positive year-over-year in December, they are also both slowing sharply, and only more fiscal stimulus will save the day. Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, called December retail sales “an absolute disaster,” with consumer spending slowing sharply in November and December when the epidemic resumed.
After the release of the above poor data, U.S. stocks extended their losses in early trading Friday, with all three major indices down more than 1% at one point, as yields on long-end U.S. bonds linked to economic expectations sank and safe-haven demand pushed the dollar index higher.
More real-time data suggest consumer spending will remain weak early this year. JPMorgan Chase’s tracking statistics for 30 million credit and debit card holders show that spending by these individuals fell 1.1% year-over-year in the week ended Jan. 10. Businesses and economists alike expect activity to likely slow in the coming months until more people get vaccinated with the new crown vaccine and then economic activity will rise again.
For now, the market is focused on the size of a new round of U.S. fiscal stimulus, with Biden unveiling a $1.9 trillion anti-epidemic bailout Thursday that is expected to send another $1,400 in direct checks to eligible Americans.
Statistics show such direct money transfers could help spur consumer spending. The NPD Group, which tracks retailers, said Thursday that sales at retailers of non-essential consumer goods rose 27 percent in the week ended Jan. 9, the largest increase since the epidemic. The data came against the backdrop of a $900 billion anti-epidemic bill signed by Trump that gave Americans $600 checks earlier in the year.
In addition, another data release Friday showed that total U.S. industrial output rose 1.6 percent in December from a year earlier, the largest increase since July 2020, and still retreated 3.6 percent from a year earlier. The largest share of manufacturing output rose 0.9 percent from a year earlier, better than the expected increase of 0.5 percent, for the eighth consecutive month of rebound in the U.S. manufacturing sector, still down 2.8 percent from a year earlier.
Analysis says that the U.S. manufacturing sector has recovered most of the losses since the epidemic, and industrial production is providing the main impetus for the economic recovery against the backdrop of slowing consumer spending and job growth.
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