U.S. retailers have been hit harder than expected by the surge in coronavirus cases during the all-important holiday shopping season, this became clear on Friday, with data showing an unexpected contraction in sales in December.
The Commerce Department figures showed the third consecutive monthly drop in retail sales, in addition to a downward revision to the November figures which covered Black Friday and the start of the Christmas shopping season.
The data follows trading updates this week from lingerie retailer Victoria’s Secret, hipster clothing chain Urban Outfitters and department store operator Nordstrom, all of which saw lower earnings over the holidays.
Taken as a whole, the releases have heightened concerns about the pandemic’s toll on the world’s largest economy and its brick-and-mortar retailers in particular. The S&P 500 index for the retail sector fell 2.5% on Friday, significantly underperforming the market as a whole.
“The further decline in retail sales in December confirms that the continued surge in coronavirus infections is now weighing heavily on the economy,” said Andrew Hunter, senior US economist at Capital Economics.
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He added that “the next few months may still be difficult”, despite hopes of a new $ 1.9 billion stimulus package that President-elect Joe Biden presented on Thursday.
December’s 0.7% monthly drop was lower than estimates by economists, who expected retail sales to hold broad overall from November. And after revisions, retail sales in November fell 1.4 percent, lower than the previous figure of a drop of 1.1 percent.
Following a resurgence of the coronavirus in the fall, several US states have imposed tougher shutdowns that have kept more Americans at home and put pressure on the job market. The US economy lost 140,000 jobs in December, due to layoffs in the hospitality industry as restrictions were imposed on bars and restaurants.
Department store sales were particularly hard hit, falling a further 3.8% and exacerbating the crisis in the sector. Electronics and home appliance stores also struggled, with sales falling 4.9%.
Sales of cars and parts were a positive, up 1.9 percent. Excluding the automotive sector and sales at gasoline stations, which advanced 6.6%, retail sales in the United States fell 2.1%.
Despite the latest monthly decline, however, retail sales were still 2.9% higher than at the same time last year thanks to rising demand for household and DIY items. sales of health and personal care products and an e-commerce boom.
Cuts in travel, food and other discretionary spending have freed up household budgets for online shopping.
The data lays bare the extent of the shift in consumer spending habits that has benefited Amazon and a handful of favorite brick-and-mortar operators, such as Walmart and Target, to the detriment of department stores and retailers. other shopping mall chains.
E-commerce sales grew 19 percent on an annual basis. In contrast, sales slipped 16% in clothing stores and 21% in department stores.
Economists predict that additional stimulus from Washington, combined with the rollout of coronavirus vaccines, will boost consumer spending this year. The tax aid approved by Congress late last month, which included payments of $ 600 to many Americans, only arrived after the holiday shopping rush.
Neil Saunders, chief executive of consulting firm GlobalData, said the overall retail sales have been resilient. For the year as a whole, he noted, total retail sales, including e-commerce, were 0.6% higher than they were in 2019.
“This is a very acceptable result given the circumstances of the year and underlines the resilience of the retail sector and its flexibility to adapt,” he said.