U.S. Retail Sales Post Surprise Monthly Drop to Cap Dismal Year

(Bloomberg) -- U.S. retail sales declined at the close of the holiday-shopping season, wrapping up a painful year for the nation’s merchants as the pandemic forced store closures and kept consumers at home.

Total retail receipts decreased 0.7% in December from the prior month after a downwardly revised 1.4% drop in November, Commerce Department figures showed Friday. The median forecast in a Bloomberg survey of economists called for no change in December.

The unadjusted value of sales increased just 0.6% in 2020 compared with a year earlier, the weakest in 11 years.

“The December retail results were an absolute disaster,” Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, said in a note. “Clearly, consumer spending slowed down sharply in November and December as the virus gained ground and forced closures of stores and restaurants in many key states.”

The disappointing results reflected weaker sales at department stores, online merchants and restaurants, indicating the biggest part of the U.S. economy -- consumer spending -- took a step back in fourth quarter. At the same time, a separate report showed much firmer manufacturing output, which has been a bright spot in the recovery.

For all of last year, the modest increase in the value of retail sales followed a 3.6% gain in 2019. The S&P 500 fell for a second day, while the dollar rose and the yield on the 10-year Treasury note declined.

While additional fiscal support for households will help bolster Americans’ financial positions, the next handful of months for retailers may be challenging until many more Americans are vaccinated and travel and leisure activity is restored.

The lackluster retail figures follow a report Thursday that showed the biggest weekly increase in applications for state jobless benefits since late March.

Stimulus Package

Federal Reserve Chair Jerome Powell said during a virtual event on Thursday that the economy is still far from where the Fed would like it to be, but that “there could be quite exuberant spending and we could see some upward pressure on prices” as the pandemic recedes.

“The real question is, how large is that effect going to be, and will it be persistent?” he said.

The coronavirus relief package signed by President Donald Trump in late December -- which included $600 stimulus checks for individuals and extended unemployment benefits through March -- could limit further deterioration in retail sales early this year.

President-elect Joe Biden released details of another relief package on Thursday, which proposes additional government stimulus payments of $1,400.

Retail sales excluding autos declined 1.4% in December, the most since April. So-called control group sales, which exclude food services, car dealers, building-materials stores and gasoline stations, plummeted 1.9% last month, also the most in eight months. The measure is often considered more reflective of underlying consumer demand.

Other Friday Reports

• Factory output climbed 0.9% in December, almost double the median estimate of 0.5%, on stronger production of consumer goods, business equipment
• Consumer sentiment declined in January, with the University of Michigan’s preliminary index dropping to 79.2 from 80.7 in the prior month
• Manufacturing in New York continued to expand in January, though at a slightly slower pace than a month earlier
• Prices paid to U.S. producers rose less than expected in December. The producer price index for final demand climbed 0.3%, Labor Department figures showed

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