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US Retail Sales Take Hit as Consumers Tighten Belts During Holiday Season

by Adam Corbett | January 15, 2021

Retail sales for the month of December dropped 0.7% in the US against an expected flat reading. Stripping away the volatile price swings of automobiles, the core reading printed a decline of -1.4%, much lower than the consensus estimate of a modest -0.1% decline.

The Census Bureau notes sales of electronics, retail outlets and general merchandise were notable drivers of the decline.

With headlines centered around Capitol Hill, currency markets seemingly remain largely indifferent to economic releases.

When considering the downward revision of the November reading to -1.4%, it’s quite clear that consumers were reluctant to spend this holiday season.

As we saw yesterday with the unemployment claims print, more individuals are finding themselves unemployed and their natural response is to cut spending. December also marks the third straight month of declines, with most subcategories falling.

Traders typically lean on retail sales figures because the US consumer drives approximately 70% of economic activity. In an environment with so many workers furloughed or unemployed, there is no surprise to see downward pressure on the prices of goods and services.

To combat these pressures, the incoming administration of President-elect Joe Biden released its latest stimulus package yesterday, including a $1400 direct payment to individuals. This may prove to be the booster shoot the consumer needs to strengthen their spending habits – and thereby the economy as a whole.

 

Adam Corbett
Business Development Manager, Canada & Currency Analyst
acorbett@cambridgefx.com

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