Market Wire - Unprecedented Holiday Shopping Loses Momentum in December

Responding to stories of rising prices and supply chain disruptions, American consumers did the bulk of their holiday shopping in October and November last year, contributing to a substantially weaker than expected retail sales number in December. According to figures published by the Census Bureau this morning, sales at retail stores, online sellers and restaurants dropped by a seasonally adjusted 1.9 percent on a month-over-month basis in December. Markets were expecting a number closer to 0.1 percent.

With gas and motor vehicle sales excluded, receipts fell 2.5 percent.

Momentum fell across most tangible goods categories: Sporting goods were down -4.3 percent, clothing fell -3.1 percent, and home furnishing stores tumbled -5.5 percent month-over-month. Auto dealers suffered a -0.4 percent loss. Building materials eked out a 0.9 percent gain.

Losses hit online retailers harder than bricks-and-mortar stores: Receipts at general merchandise operations posted a -1.5 percent decrease, while e-commerce sales plunged -8.7 percent - something that removes the omicron variant from the list of suspects.

But holiday spending remained far above historical records: December sales were 16.9 percent above December 2020, and total sales for 2021 were up 19.3 percent from the prior year. Back-of-the-envelope calculations suggest that unadjusted sales in the October to December period were up 21.7 percent over the same period in 2019 - significantly outpacing rising prices.

Treasury yields ticked downward and the dollar traded sideways: The print convinced economists to lower fourth quarter gross domestic product expectations, while leaving monetary policy forecasts largely intact. Traders continue to position for three or four Federal Reserve rate hikes this year.