A report released by the Commerce Department on Friday unexpectedly showed a steep drop in U.S. retail sales in the month of December.
The Commerce Department said retail sales tumbled by 1.9 percent in December after edging up by a revised 0.2 percent in November.
The sharp pullback surprised economists, who had expected retail sales to come in unchanged compared to the 0.3 percent growth originally reported for the previous month.
Michael Pearce, Senior U.S. Economist at Capital Economics, said the unexpected slump in retail sales appears to mainly reflect the ongoing impact of higher prices and supply shortages.
The report showed sales by non-store retailers plummeted by 8.7 percent, while furniture and home furnishing stores, clothing and accessories stores, sporting goods, hobby, musical instrument and book stores and electronics and appliance stories also saw sharply lower sales.
Sales by motor vehicle and parts dealers saw a more modest 0.4 percent drop in December after creeping up by 0.2 percent in November.
Excluding auto sales, retail sales plunged by 2.3 percent in December after inching up by a revised 0.1 percent in November.
Economists had expected ex-auto sales to rise by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.
The Commerce Department said closely watched core retail sales, which exclude automobiles, gasoline, building materials and food services, also tumbled by 3.1 percent in December after falling by 0.5 percent in November.
Pearce said the initial wave of the Omicron variant of the coronavirus appeared to have only a small impact, with food services sales declining by a modest 0.8 percent.
“Factoring in the huge drop in control group sales and modest hit to services spending, we estimate that real consumption fell by close to 1.0% m/m last month, which implies growth of just 3.5% annualized in the fourth quarter,” Pearce said. “As a result, we are lowering our forecast for fourth quarter GDP growth to 4.0%, from 4.5%.”
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