U.S. retail sales declined further in December as renewed measures to slow the spread of COVID-19 undercut spending at restaurants and reduced traffic to shopping malls, the latest sign the economy lost considerable speed at the end of 2020.
Retail sales dropped 0.7% last month, the Commerce Department said on Friday. Data for November was revised down to show sales declining 1.4% instead of 1.1% as previously reported. Economists polled by Reuters had forecast retail sales unchanged in December.
Excluding automobiles, gasoline, building materials and food services, retail sales tumbled 1.9% last month after a downwardly revised 1.1% decline in November. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have decreased by 0.5% in November.
The report followed in the wake of news last week that the economy shed jobs in December for the first time in eight months. Further job losses are likely in January as new applications for unemployment benefits surged in the first week of the month. The data are in line with economists’ expectations for a sharp slowdown in economic growth in the fourth quarter.
Rampant coronavirus infections and delays by the government to approve more money to help businesses and the unemployed are behind the loss of economic momentum. The government provided nearly $900 billion in additional pandemic relief at the end of December.
President-elect Joe Biden on Thursday unveiled a $1.9 trillion fiscal stimulus plan that includes bolstering the response to the virus and direct relief to households and small businesses. The proposed additional relief and speeding up the deployment of vaccines are expected to boost spending and the economy in the second half of 2021.
Growth estimates for the fourth quarter are around a 5% annualized rate, largely reflecting an inventory build.
The economy grew at a 33.4% rate in the third quarter after contracting at a 31.4% pace in the April-June quarter, the deepest since the government started keeping records in 1947.