Retail Spending Dips For 3rd Straight Month As Infections Surge

Updated at 12:30 p.m. ET

Restaurants and bars are reeling from persistent spikes of coronavirus cases and related restrictions in their communities, driving retail spending in December down for the third month in a row.

Even as people continue to splurge on shopping, they cut back on going out to eat and shop. Plus, the earlier-than-usual holiday shopping season meant online shopping as well sales of electronics and appliances dipped in December. Gas stations saw the biggest jump in spending last month, up 6.6%, as people traveled for holiday visits despite health warnings.

Overall, retail sales last month fell 0.7% compared to November, although they were still higher than a year earlier, the Commerce Department said Friday. This measure is a major part of the U.S. economy, which continues to be battered by the pandemic. It includes spending on household goods, clothing and housewares as well as outlays on gasoline, cars, food and drink.

Shopping at stores over the holidays actually led to a record-breaking season. People spent almost $790 billion on gifts and other purchases in the last two months of 2020, the National Retail Federation said Friday. This growth, up 8.3% compared with 2019, was nearly double that seen in previous years.

Spending at restaurants and bars, meanwhile, was still down 21.2% in December compared to a year earlier, according to the Commerce data.

This was a reflection of an unusual economic downturn. Even as millions lost jobs, Americans have continued to buy and renovate homes, splurging online on devices, workout gear and pricey purchases such as appliances and furniture that drove a lot of 2020 spending.

"Even as households have lost jobs precipitously, money that was no longer being spent on services freed up budgets to spend on goods," researchers at the Federal Reserve wrote in a new note on Thursday.

U.S. retail sales recovered fairly quickly to surpass pre-pandemic levels last summer. Enhanced jobless benefits helped. And people substituted spending on travel and nights out with purchases of goods. Many retailers launched holiday sales much earlier than usual, some in October, spreading out the crush of spending that would ordinarily happen in December.

Here's where people were spending in December, compared to November, according to the Commerce Department data:

• Gas stations: +6.6%
• Clothing and accessories stores: +2.4%
• Home improvement and gardening stores: +0.9%
• Sports, music and other hobby stores: -0.8%
• Big-box stores: -1.2%
• Grocery stores: -1.7%
• Department stores: -3.8%
• Restaurants and bars: -4.5%
• Electronics and appliances stores: -4.9%
• Online retailers: -5.8%

The National Retail Federation's latest economic review said the vaccine rollout plus a new round of federal financial relief holds high promise for spending at the start of the year, but added: "We don't expect economic activity to return to pre-pandemic levels until late 2021 and employment at those levels won't return until well into 2022 and possibly 2023."

In December, leisure and hospitality businesses lost almost half a million jobs, most of them in eating and drinking establishments. Despite solid job gains in the summer and early fall, the U.S. has so far recovered less than 56% of the jobs that were lost last spring.

NPR's Scott Horsley contributed to this report.

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