December retail sales fall 1.9% after early holiday rush

Americans, beset by product shortages, rising prices and the arrival of omicron, sharply cut their spending in December after a burst of early spending in the fall boosted this year’s holiday shopping season.

Retail sales fell a seasonally adjusted 1.9% in December from November when sales increased 0.3%, the U.S. Commerce Department said Friday. Sales rose 1.8% in October. Still, retail sales surged 16.9% compared with December 2020, the Commerce Department said Friday.

Spending declines were spread across numerous sectors. According to the report, department store sales fell 7%, restaurant sales slipped 0.8%, and online sales fell 8.7% compared with the previous month.

The World Health Organization identified omicron in late November, and the December report from the Commerce Department is the first to capture some of its effect on consumer behavior.

The monthly retail report covers only about a third of overall consumer spending. It doesn’t include money spent on things like haircuts, hotel stays or plane tickets, all of which tend to see business tail off when anxiety about COVID-19 tick higher. In November, restaurant sales posted a 1% gain — the sector’s best performance since July.

And it’s been a strong year for retailers as spending patterns shifted but remained elevated.

The National Retail Federation, the nation’s largest retail trade group, is crunching last month’s sales figures and is expected to release the actual holiday sales results Friday. Despite the challenges facing shoppers and stores, it expected a record-breaking growth of anywhere from 8.5% to 10.5% compared to the year-earlier period. I

The omicron variant has led to widespread worker shortages, with many people calling out sick, including the retail sector. Supply shortages have curtailed what makes it to store shelves. Stores and restaurants have slashed operating hours or remained closed on days they had previously been open.

This week, Lululemon warns that fourth-quarter sales and profits will likely come in at the low end of its expectations as it grapples with the variant’s fallout.

“We started the holiday season in a strong position but have since experienced several consequences of the omicron variant, including increased capacity constraints, more limited staff availability, and reduced operating hours in certain locations,” said CEO Calvin McDonald.

And inflation has settled in across almost every level of the economy, forcing the Federal Reserve to stop describing the rising prices as “transitory.”

Inflation jumped at its fastest pace in nearly 40 years last month, a 7% spike from a year earlier, increasing household expenses and biting into wage gains. And the most significant price spikes are hitting where Americans can feel it, with the cost of homes, cars, clothes and food racing higher.

Raquel Schuttler, 53, who works in fashion sales, says that the surging costs for food have had a psychological impact on her spending everywhere.

The Atlanta resident, who does the grocery shopping for her 17-year-old son and her fiancee, used to make intermittent trips to the grocery store in between big shopping trips but those shorter trips are now costing her $280 instead of $220. She has pulled back lunches at the mall with friends to avoid the temptation to shop there.

“I am being much more conservative,” she said. “I stopped any kind of going out impulsively.”