Bad News at the Close of 2021 on Retail Sales

By SBE Council at 14 January, 2022, 11:52 am

by Raymond J. Keating -

There's no getting around or spinning the Census Bureau's retail and food services sales report for December 2021: It's bad.

Retail and food services sales for December declined by 1.9 percent compared to the previous month. Nearly all major sales categories were down, including nonstore (mainly e-commerce) retail, which was off by 8.7 percent.

Unfortunately, November sales also were downgraded slightly, from up 0.3 percent to up 0.2 percent.

Since inflation is not factored into this data, real retail sales actually performed even worse, with both November and December inflation-adjusted sales suffering declines.

As noted in the following chart, retail sales experienced strong growth after the initial hit of the pandemic through April 2021.

But since then retail sales essentially have been flat. In fact, December 2021 sales actually came in below the April 2021 level. And again, consider inflation, and real sales clearly are down since at least April 2021.

Source: Federal Reserve Bank of St. Louis, FRED

Why the Poor Showing?

Among the possible issues or causes in play here are, of course, COVID variants (i.e., Omicron), raging inflation hitting Americans' buying power, as well as concerns about how well or poorly the economy is going to perform going forward, again including inflation.

Direction of Federal Policy is Not Helping

Policymakers, unfortunately, are simply adding to the uncertainty by pushing an agenda focused on more costly government, that is, increased taxes, more regulation, and more spending which will only serve to undermine entrepreneurship, business and investment during a time when the economy already is suffering.

Imagine if our elected officials thought more clearly on these such matters, and actually were working to implement sound policies like tax and regulatory relief so that entrepreneurship and investment could more easily expand, and our economic recovery would stand on more stable ground.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.