COVID-19 pressures U.S. retail sales; manufacturing shines
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. retail sales fell for a third straight month in December as renewed measures to slow the spread of COVID-19 triggered job losses, further evidence that the wounded economy lost considerable speed at the end of 2020.
The downturn in sales reported by the Commerce Department on Friday is, however, unlikely to push the economy back into recession, with other data 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 backstop.
The ebbing economic momentum, which appears to have spilled over into the new year, could persuade the U.S. Congress to agree to President-elect Joe Biden's ambitious $1.9 trillion fiscal stimulus plan, which includes bolstering the response to the virus and direct relief to households and small businesses.
"That should make Congress more willing to deal on Biden's wish list," said Steven Blitz, chief U.S. economist at TS Lombard in New York. "Critical to Biden's story is that the virus itself is creating the downturn, not any fundamental problems with the economy, and this is what needs to be done to address it."
Retail sales dropped 0.7% last month. Data for November was revised down to show sales tumbling 1.4% instead of 1.1% as previously reported. Sales rose 2.9% on a year-on-year basis.
The monthly decline in sales was led by a 4.5% plunge at restaurants and bars after many authorities banned indoor dining over the holiday season. Online sales tumbled 5.8%. Receipts at electronics and appliance stores dropped 4.9%.
Consumers also cut back spending at sporting goods, hobby, musical instrument and book stores as well as beverage stores. That offset a 1.9% rebound in sales at auto dealerships and a 2.4% 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, gasoline, building materials and food services, retail sales tumbled 1.9% last month after a downwardly revised 1.1% 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 0.5% in November.
"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 U.S. economist at Oxford Economics in New York. "Biden's ambitious fiscal agenda could juice up household spending during the delicate vaccine rollout phase."