WASHINGTON: US retail sales fell for a third straight month in December amid job losses and renewed measures to slow the spread of Covid-19, further evidence that the economy lost speed at the end of 2020.
Still, the economy is unlikely to slip back into recession, with other data yesterday showing production at factories accelerating last month. There is also cautious optimism that nearly $900 billion in additional pandemic relief provided by the government at the end of December will offer a back stop.
President-elect Joe Biden on Thursday unveiled a $1.9 trillion fiscal stimulus plan that includes bolstering the response to the virus and direct relief to households and small businesses.
“There were plenty of culprits ruining the holiday spirit, including a frightening health situation, rising layoffs, and a looming lapse in jobless benefits,” said Lydia Boussour, a senior US economist at Oxford Economics in New York. “Biden’s ambitious fiscal agenda could juice up household spending during the delicate vaccine roll-out phase.”
Retail sales dropped 0.7 per cent last month, the Commerce Department said. Data for November was revised down to show sales declining 1.4pc instead of 1.1pc as previously reported. Sales at restaurants and bars plunged 4.5pc. Online sales tumbled 5.8pc. Receipts at electronics and appliance stores dropped 4.9pc.
Consumers also cut back spending at sporting goods, hobby, musical instrument and book stores as well as beverage stores. That offset a 1.9pc rebound in sales at car dealerships and a 2.4pc increase in receipts at clothing stores. There were also gains in sales at building material stores as well as health and personal care outlets.
Excluding automobiles, petrol, building materials and food services, retail sales tumbled 1.9pc last month after a downwardly revised 1.1pc decline in November. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have decreased 0.5pc in November.
The continued weakness in core retail sales prompted economists to cut their consumer spending and GDP growth estimates for the fourth quarter. The report followed in the wake of news last week that the economy shed jobs in December for the first time in eight months. Further job losses are likely in January as new applications for unemployment benefits surged in the first week of the month.
In a separate report yesterday, the Federal Reserve said manufacturing production rose 0.9pc last month after advancing 0.8pc in November. That was the eighth straight monthly gain in factory production. Manufacturing is being supported by a shift in demand towards goods from services.