Retail sales in the U.S. declined sharply in December, indicating that the worst inflation in decades is hitting consumers harder than analysts expected.
Total retail sales dropped 1.9 percent in December, typically a month of robust holiday shopping, Commerce Department data showed Friday. The figures are not adjusted for inflation, suggesting that price-adjusted purchases were even weaker. The Consumer Price Index rose 0.5 percent in December.The results were far worse than analysts expected. The median estimate by analysts was for sales to be flat to down just one-tenth of a percentage point. Retail sales were better than expected in September and October, suggesting that concerns about inflation and shortages of goods may have pulled some shopping forward. Sales rose 0.8 percent in September and 1.7 percent in October. In an inflationary environment, making purchases early can help avoid higher prices later.
November was revised down from a 0.3 percent gain to 0.2 percent gain. The Consumer Price Index jumped 0.8 percent in November, following an increase of 0.9 percent in October. This suggests that inflation-adjusted sales actually declined on a month-over-month basis in November.
The worse than expected retail sales figures were foreshadowed by disappointing jobs numbers in November and December. Many businesses likely hired early in reaction to early shopping and concerns about supply chain and shipping delays hitting later. Employers added 531,000 employees to payrolls in October and there were a record 11 million job openings at the end of the month.
Excluding motor vehicles, which have been in short supply due to supply chain issues, and gasoline station sales, retail sales fell by 2.5 percent. Excluding restaurant sales, retail sales were down 2.1 percent.
Sales were down a steep 5.5 percent at furniture stores and off 2.9 percent at electronics and home appliance stores. Sporting goods stores, hobby stores, books stores, and musical instrument stores saw a 4.3 percent decline. Department store sales fell seven percent. Online sales plummeted 8.7 percent.
Despite the disappointing December, sales grew briskly on an annual basis. Total sales for 2021 were up 19.3 percent and sales excluding cars and gas stations were up 16.5 percent. Department store sales were up 22.3 percent and electronic store sales were up 25.2 percent. Those figures are not adjusted for inflation. Prices rose seven percent in 2021, according to the Department of Labor. Online sales were up 13.6 percent. Prices of durable goods were up 16.8 percent and nondurable goods less food and beverages were up 15.8 percent, suggesting that more than half the gain in sales at many stores was due to higher prices.