U.S. retail sales tumbled in December as Americans struggled with shortages of goods and an explosion of COVID-19 infections, but that will likely not change expectations that economic growth accelerated in the fourth quarter.
Retail sales dropped 1.9% last month after rising 0.2% in November, the Commerce Department said on Friday.
Economists polled by Reuters had forecast retail sales unchanged. Estimates ranged from as low as a drop of 2.0% to as high as a 0.8% increase.
Bottlenecks in the supply chains caused by the pandemic have led to shortages of goods, including motor vehicles. That resulted in consumers starting their holiday shopping in October, which hurt retail sales in December.
The pulling forward of sales could also have impacted the so-called seasonal factor, the model that the government uses to strip out seasonal fluctuations from the data. The drag from the seasonal factor was likely in the online sales category.
Retail sales are mostly made up of goods, with services like healthcare, education and hotel accommodation making up the remaining portion of consumer spending. Restaurants and bars are the only services category in the retail sales report.
January Retail Numbers Could Be Worse
Sales could weaken further in January as spiraling COVID-19 infections, driven by the omicron variant, limit consumer traffic to places like restaurants and bars.
Excluding automobiles, gasoline, building materials and food services, retail sales plunged 3.1%. Data for November was revised lower to show these so-called core retail sales falling 0.5% instead of dipping 0.1% as previously reported.
Core retail sales correspond most closely with the consumer spending component of gross domestic product. Economists say the surge in core retail sales in October was enough to ensure strong economic growth in the fourth quarter. Though inflation has outpaced wage gains, spending remains underpinned by massive savings and increased job security.
Economic growth estimates for the October-December quarter top a 7.0% annualized rate. The economy grew at a 2.3% pace in the third quarter. Growth last year is expected to have been the strongest since 1984.
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