US retail sales sank again in December as surging COVID-19 cases slammed holiday spending

Irene Jiang / Business Insider
  • US retail sales declined 0.7% in December, landing below the consensus economist forecast for unchanged spending.
  • The reading marks a third straight month of contraction following November’s 1.4% drop and a mild decline in October.
  • The data suggests strong online sales through the holiday season failed to offset COVID-19 lockdowns and surging case counts.
  • Still, the $US900 billion stimulus plan signed by President Trump late last month and a new $US1.9 trillion plan pushed by President-elect Joe Biden could boost retail spending throughout 2021.
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Spending at US retailers contracted through the last month of 2020 as economic restrictions offset holiday-season sales.

US retail sales contracted 0.7% in December, according to Census Bureau data released Friday. Economists surveyed by Bloomberg expected sales to hold steady from the month prior. While spending fell from the prior month, it still grew 2.9% from December 2019.

November’s reading was revised lower to a 1.4% decline.

Retail sales growth has stumbled after climbing for five consecutive months through September. The $US2.2 trillion stimulus bill passed in March bolstered household incomes and buoyed spending through the start of the pandemic. But months of deliberation over a follow-up bill saw the CARES Act’s relief programs expire and retail sales decline. Spending contracted slightly in October before contracting 1.1% in November.


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Gauges like the Census Bureau’s retail spending report give critical insight into the overall path of the US economy. Consumer spending counts for roughly 70% of economic activity. Renewed lockdown measures across the country have cut into Americans’ ability to spend in recent months, particularly in the service sector and at brick-and-mortar stores.

While online spending predictably surged during the holiday season, a drop in in-person sales dragged on retailers. Overall holiday spending climbed 3% from the year-ago period, according to Mastercard SpendingPulse data published December 26.

E-commerce sales climbed 49% from 2019 levels, yet in-store shopping at department stores tumbled 10%. In-person spending on clothing and luxury items sank 19% and 21%, respectively.

New stimulus could provide retailers a much-needed boost to kick off the new year. President Donald Trump signed a $US900 billion relief measure on December 27 to further prop the economy as the coronavirus pandemic rages on. The measure includes, among other elements, $US600 direct payments and expanded unemployment benefits. The two programs’ effectiveness at the start of the pandemic suggests they can lift spending in the coming weeks.


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President-elect Joe Biden aims to further buttress the economy through his own fiscal support plan. The former vice president rolled out a $US1.9 trillion initiative on Thursday that includes $US1,400 direct payments, state and local government aid, and an expansion of the child tax credit. Democrats’ victories in Georgia runoff elections gives the party a soft majority in the Senate and drastically increases the odds of passing such a large stimulus bill.

Increased stimulus will still face off against elevated COVID-19 cases. The US reported 222,944 new coronavirus cases on Thursday, according to The COVID Tracking Project. Deaths neared 380,000 and hospitalizations declined slightly to 128,947.

Widespread vaccination against the virus is expected to drive a more permanent reopening and, in turn, can stabilise growth for retailers. Yet rollouts hit snags across several states, from shots expiring before use to miscommunication over individuals’ eligibility.

About three-in-four Americans would need to be vaccinated to achieve herd immunity. While states including Alaska and North Dakota have surpassed 6% vaccination, others are below the 3% level, according to data tracked by Bloomberg.


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