U.S. economists keep eye on retail sales
Concern raised over possible cuts in consumer spending because of inflation
Retail sales took an unexpected dip in December in what economists say could be a signal that persistently rising inflation is prompting a pullback in consumer spending.
Consumers paid more for everything from groceries to cars in 2021 as companies passed along the costs of pricier raw materials and supply-chain delays. Spending remained strong thanks to pent-up demand throughout the year, despite the rising costs and longer waits for big-ticket items like cars and furniture.
Pressure from inflation has been building, though, as have concerns that consumers will eventually pull back on spending as they tire of higher prices hitting their wallets with no relief in sight.
Too much shouldn’t be read into one report, said Jeff Buchbinder, equity strategist for LPL Financial. “But it does highlight that the stakes are high in the battle against inflation with higher prices eroding purchasing power.
Persistently rising inflation has made goods more expensive all around, therefore cutting purchasing power by making people stretch their dollars more for the same items.
Retail sales fell 1.9% in December, a key month in the holiday shopping season for many retailers. Economists expected a breakeven month, owing to the increased spending by consumers in November as businesses warned about product shortages and shipping delays early in the holiday season.
Retail sales haven’t fallen by that much since early in 2021 and the drop this time occurred in the same month that inflation spiked in several measures.
“We had a lot of momentum the last time we spoke with you heading into December,” Abercrombie & Finch CEO Fran Horowitz told investors in a recent financial update. “But as receipts flowed, we just did not have the inventory to keep