December Retail Sales Drop 1.9 Percent as Inflation Hits US Consumers

U.S retail sales sharply fell 1.9 percent in December, as inflation and supply issues hit prices, according to a Commerce Department report on Jan 14.

The disappointing results were worse than the Dow Jones’s estimate, which had earlier predicted a 0.1 percent drop.

The new surge in Omicron cases is being blamed as a factor for the decline in consumer confidence, as well as high prices.

The bad news put an end to what had been an otherwise strong year in which post-2020 pandemic sales had recovered with a rise of 16.9 percent.

Weak online holiday sales were responsible for much of the slide, witnessing a plunge of 8.7 percent in sales for the month.

There was also a fall in spending on outdoor dining, which had earlier posted a 41.3 percent annual gain for the year.

Last month’s sharp decline in consumer spending followed a record-level 1.8 percent gain in October from the previous month.

Sales excluding vehicle purchases fell 2.3 percent, well short of the predicted 0.3 percent increase.

Wholesale prices climbed 9.7 percent, the highest 12-month period on record going back to 2010.

Home furnishing sales fell 5.5 percent, while sporting goods, music, and book stores purchases dipped 4.3 percent.

The price surges hit following trillions of dollars in U.S. government stimulus spending, which injected cash into the economy during the pandemic.

There was some positive news in other sectors of the U.S. economy last month.

Discount store merchants and sellers of building and gardening materials have respectively seen an increase of 1.8 percent and 0.9 percent, as customers have started to grow their own food to sidestep grocery shortages and inflated prices.

A new report on Jan. 14 from the Labor Department showed a 0.2 percent fall in import prices for the month, the first since August, opposite from the predicted increase of 0.2 percent.

The decline in import prices was mainly due to a 6.5 percent fall in global oil prices.

Gasoline prices declined 0.5 percent last month to close out a year when prices at the pump skyrocketed up 49.6 percent compared to the previous winter.

U.S. manufacturing output dropped 0.3 percent, the first decline since September, as supply-chain issues continue to affect output, according to the Federal Reserve.

Industrial output fell 0.1 percent in December, after a 0.7 percent gain in November, while industrial capacity slipped to 76.5 percent last month from 76.6 percent the prior month.

The consumer price index rose 0.5 percent for December 2021, which showed a 7 percent increase from 2020, the highest price gain since June 1982.

Federal Reserve officials have been stressing the importance of heading off inflation, with multiple policymakers saying they expect interest rates to rise as soon as March.

Christopher Waller, a board member of the Federal Reserve, said on Jan. 12 that the Fed may carry out three to five interest-rate increases this year to address the worse inflation seen in 40 years.

President Joe Biden, meanwhile, has placed much of the blame for rising prices on high consumer demand for goods, instead of service and supply-chain issues.

From The Epoch Times