Retailers overall saw an 8.3 percent gain in Holiday 2020 sales for the months of November and December, but the U.S. Census Bureau’s December data said apparel and accessory store sales were down 16 percent from 2019.
Holiday sales recap
The holiday data was from the National Retail Federation, a retail trade organization, which said on Friday that retail sales grew unexpectedly to $789.4 billion, excluding automobile dealers, gasoline stations and restaurants. The NRF in November projected a gain of between 3.6 to 5.2 percent above 2019’s $729.1 billion, which was already higher than the average holiday sales increase of 3.5 percent over the past five years. NRF based its holiday estimates on data from the Census Bureau.
“Despite unprecedented challenges, consumers and retailers demonstrated incredible resilience this holiday season,” Matthew Shay, NRF president and CEO, said. “Faced with rising transmission of the virus, state restrictions on retailers and heightened political and economic uncertainty, consumers chose to spend on gifts that lifted the spirits of their families and friends and provided a sense of normalcy given the challenging year. We believe President-elect Biden’s stimulus proposal, with direct payments to families and individuals, further aid for small businesses and tools to keep businesses open, will keep the economy growing.”
Jack Kleinhenz, NRF’s chief economist, said the strong finish to the holiday season could be a good sign for economic recovery this year. He also noted that holiday-related spending picked up in the third and fourth weeks of December, after it was too late to expect online purchases to arrive by Christmas. Consumers also took advantage of quick trips to stores and the buy online and pick up in-store or curbside options.
“There was a massive boost to most consumer wallets this season,” Kleinhenz said. “Consumers were able to splurge on holiday gifts because of increased money in their bank accounts from the stimulus payments they received earlier in the year and the money they saved by not traveling, dining out or attending entertainment events. Some families are still struggling, as are some retail sectors. But the promise of a new round of stimulus checks after a deal was struck before Christmas helped increase consumer confidence. Consumers were also encouraged by the news of COVID-19 vaccines becoming available, which helped offset concerns about increased infection rates and state restrictions on activity.”
Craig Johnson, president of research data firm Customer Growth Partners, added that the holiday season’s “extraordinary” uptick is nothing less than a “testament to the optimism and resilience of everyday Americans.”
“Certainly, households without jobs struggled, but our field team saw solid momentum across the income spectrum, and both at deep-value and luxury venues,” Johnson added. CGP, which estimated that holiday sales grew 8.6 percent, said the entire week before Christmas, along with Boxing Day on Dec. 26, saw record sales and transaction volume. Overall, average ticket prices rose as shoppers consolidated trips, while many retailers boosted their online sales by 40 to 80 percent.
“The key question is how far Holiday’s stellar growth will shine deeper into in the new year, with the remarkably sound household fundamentals facing off against Covid and employment growth fears. If employment growth lags, retail sales growth may ease to about 3.5 percent; but if employment accelerates, we may well see solid 4.5 to 5 percent year-over-year well into 2022,” Johnson said.
US retail sales in December
Separately, the Census Bureau on Friday said that U.S. retail sales were down 0.7 percent in December, and had declined 1.4 percent in November, on an adjusted basis. Apparel and accessories in December were up 2.4 percent from November, but down 16 percent from a year ago, on an adjusted basis. Department store sales fell 3.8 percent from November, and declined from 21.4 percent from a year ago. Online retailers saw sales fall 5.8 percent from November, but were up 19.2 percent from year-ago figures.
Economists from Well Fargo Securities noted that the decline in U.S. retail sales in December represented the third straight monthly decline. “Total retail sales are still up 2.9 percent over the year, but surging COVID cases have led to diminished consumer sentiment and a pullback in consumer spending,” they said in a report on Friday. The economists also said that should the pace of vaccine distribution ramp up, then possibly consumer spending will improve as vaccines become more widely distributed. But a stronger pace of consumption eventually would lead to some modest inflationary pressures, even though inflation is “fairly subdued at present.”
That means inflation is likely to remain below the average inflation target, possibly leading the Federal Reserve to tighten monetary policy. “The topic of a sooner-than-anticipated rate hikes or asset purchase tapering has recently risen to the fore alongside vaccine deployment, additional fiscal relief and overall brighter prospects for economic growth,” they said, noting that Fed vice chairman Richard Clarida has said that rates would not be raised “until inflation hit 2 percent for a year.”
Small business and rising jobless claims
The Wells Fargo economists also said the Covid resurgence is impacting small businesses. Small business confidence fell 5.5 points to 95.9 in December, they said, noting that firms are reporting weakening outlooks for business conditions and sales as owners harbor growing concerns about tighter operating margins.
Weekly first-time jobless claims for the week ended Jan. 7 totaled 965,000, a sizable jump from the Dow Jones estimate of 800,00. The estimate was already higher than the 784,000 first-time claims for the week ended Jan. 2, and represented the largest total number of initial claims since August.
Ten months into the pandemic, the unemployment rate remains at 6.7 percent.
President-elect Joe Biden Thursday night unveiled Part One of his “American Rescue Plan,” a sweeping $1.9 trillion stimulus package that calls for a $15/hour national minimum wage, $1,400 in payments for workers and their families on top of the $600 payments from December, and higher jobless benefits extended through September.