NEW YORK — Americans shrugged off shortages, soaring prices and uncertainty surrounding the omicron variant to break spending records during the Christmas shopping season. However, figures released on Friday show that after spending vigorously at the start of the holiday season, they have slowed down their purchases sharply from November to December.
The National Retail Federation, the nation’s largest retail group, said sales rose a record 14.1% between November and December 2020 and the same months in 2021. Those figures swept away projections the federation’s growth rate of between 8.5% and 10.5%, and more than tripled the average gain over the past five years of 4.4%.
“After a disheartening holiday season in 2020, most shoppers were absolutely determined to have fun no matter what,” said Neil Saunders, CEO of GlobalData.
Yet data released by the Commerce Department showed that by the end of December, spending had fallen enough to catch economists off guard and raise doubts about the sustainability of retail sales in the face of the omicron, the inflation and persistent shortages of labor and supplies. Retail sales fell 1.9%, seasonally adjusted, from November to December.
Spending fell across many sectors overall: department store sales fell 7%, restaurants 0.8% and online shopping 8.7% from November.
Beth Ann Bovino, chief U.S. economist at S&P Global, said while there’s bound to be an “overall shock” to a lower number, the broader retail sales picture has been solid over the past few months. last months.
“It’s not a sign of consumer weakness,” said Bovino, who had forecast a drop. “Given that households have relatively strong balance sheets with high levels of savings and a strong labor market with rising wages, it seems consumers aren’t necessarily closing their wallets. They’re taking a brief break.”
Many economists expect the caution shown by consumers last month to continue this year and potentially slow the economy. Still, with the average hourly wage rising and the unemployment rate steadily falling, analysts say spending and growth could pick up, at least modestly, once the omicron fades.
“U.S. consumers ended 2021 on a very sour note,” said Sal Guatieri, senior economist at BMO Capital Markets. “That said, elevated household savings, strong job growth and improving confidence once the final peaks of the covid wave should put consumers back on a high spending path in the second quarter. “
Retailers have warned for months that their supply chains have collapsed as the country rapidly emerges from the pandemic recession, and they have urged consumers to shop early for their Christmas shopping. It seems that many Americans have taken this into account and, in fact, brought forward the usual holiday shopping period by about a month.
Matthew Shay, president and CEO of the National Retail Federation, said the sales record “is a clear testament to the power of the consumer and the ingenuity of retailers and their employees.”
“Consumers were buoyed by high wages and record savings, and started shopping earlier…than ever before,” Shay said.
Those early purchases, spurred by retailer promotions that began in October, actually caused November and December sales to drop, he said.
The National Retail Federation expects further growth in 2022, Shay said, “and we will continue to focus on the industry challenges presented by covid-19, supply chain, labor issues. labor and inflation continues.
The group publishes its annual sales forecasts each February.
Jack Kleinhenz, the federation’s chief economist, said worries about inflation and covid-19 “have put pressure on consumer attitudes but have not dampened spending”.
“Despite supply chain challenges, retailers kept their shelves stocked and consumers were able to fill their carts in-store and online,” Kleinhenz said.
“Holiday spending in 2021 reflected continued consumer demand driving the economy and is expected to continue into 2022,” Kleinhenz said. “Nevertheless, we must be prepared for challenges in the months ahead due to the substantial uncertainty brought by the pandemic.”
Commerce Department figures show retail sales jumped 1.8% in October, and on Friday it reported year-over-year figures show retail sales jumped 16, 9% last month compared to December 2020. For the whole of 2021, sales increased by 19.3% compared to the previous year.
Some economists warn that the seasonal adjustment of retail sales has been disrupted by the pandemic. The seasonal adjustment aims to take into account the normal increase in Christmas shopping in December. Last year, however, because many Americans started shopping so early, the seasonal adjustment could have exaggerated any drop in spending in December.
Some analysts also suspect that shoppers who waited until the end of the season didn’t find what they wanted and took a pass or bought gift cards. These expenses will not appear in retail data until these cards are redeemed.
All told, Americans seem to be spending their money differently — and spending more, not less, collectively.
Mastercard SpendingPulse, which tracks all sorts of payments including cash and debit cards, reported late last month that holiday sales jumped 8.5% from November 1 to December 24 compared to last month. ‘last year. It was the fastest pace in 17 years.
“Consumer spending will remain the cornerstone of economic growth this year, but the short-term trajectory will be choppy amid rising omicron cases,” said Lydia Boussour, chief US economist at Oxford Economics. Ms. Boussour said she believed that after a sluggish first quarter, spending should rebound in the spring on the strength of wage growth and savings.
Stephen Stanley, chief economist at Amherst Pierpoint, agreed, pointing to a robust labor market, pent-up demand and “a mountain of extra money to spend”.
“People will spend again once the omicron wave subsides,” Stanley predicted.
The omicron variant caused a widespread shortage of workers and many people fell ill. And supply shortages have reduced the number of goods hitting store shelves. Shops and restaurants reduced their opening hours or remained closed on days they were previously open.
This week, Lululemon warned that fourth-quarter sales and earnings are likely to be at the low end of its expectations as it grapples with the fallout from the variant.
“We started the holiday season from a strong position, but have since experienced several consequences of the omicron variant, including increased capacity constraints, more limited staff availability and reduced opening hours in some locations,” said CEO Calvin McDonald.
And inflation has taken hold at almost every level of the economy, forcing the Federal Reserve to no longer call the rise in prices “transitional”.
Inflation jumped to its fastest pace in nearly 40 years last month, a 7% spike from a year earlier that is boosting household spending and eating away at wage gains. And the biggest price increases are hitting where Americans can feel it the most, with the cost of homes, cars, clothes and food soaring.
Information for this article was provided by Anne D-Innocenzio of The Associated Press; by Serenah McKay of the Arkansas Democrat-Gazette; and by Sapna Maheshwari of The New York Times.