New York (CNN Business)US retail sales dropped last month, the Commerce Department said Friday, marking the third straight month without any growth.
Retail sales fell 0.7% in December from the month prior. Economists surveyed by Refinitiv expected sales to be flat. The Commerce Department also revised November's data lower from a 1.1% decline to a 1.4% drop.
America's economic recovery took a hit in the final months of 2020, and the retail sector hasn't been spared. Rising Covid-19 infections and renewed lockdown measures, as well as job losses, have weighed on consumer spending and were a drag on retail sales. The economy shed 140,000 jobs in December, the first decline since April.
The pandemic has forced consumer to shop more online. But not even e-commerce was spared from the December dip, falling 5.8% from the prior month. Compared with the same period a year ago, however, online sales are still up more than 19%.
Otherwise, the December declines were broad based: electronics and appliance stores saw sales decline 4.9% from the previous month, sporting goods' retailers fell 0.8%, and furniture and home furnishing stores registered a decline of 0.6%.
"The further slump in retail sales in December confirms that the continued surge in coronavirus infections is now weighing heavily on the economy," Andrew Hunter, senior U.S. economist at Capital Economics, said in a note to clients Friday.
Despite the recent pullback in consumer spending, retail sales were still up 2.9% in December from the same time last year.
Some retailers have already reported holiday sales, and the results across the sector have been mixed, highlighting the wide gap between retail's winners and losers in the pandemic.
Target (TGT) said sales grew 17.2% in November and December compared with last year. But others struggled, such as Victoria's Secret parent L Brands. L Brands' (LB) sales dropped 7% in November and December compared with the same time last year, the company said.
The weak retail sales performance doesn't bode well for consumer spending, which is vital to the US economy. Economists are worried that the weak end to 2020 will make for a sluggish start to the new year. For gross domestic product -- the broadest measure of economic growth -- this could mean less growth than hoped for in the first quarter.
The second pandemic stimulus package signed at the end of last month should help retail sales recover in January and throughout the first quarter of 2021, economists at Morgan Stanley projected in a research report this week. But the turn of the year alone won't be enough to make people shop and stimulate the economy.
The University of Michigan's first look at January consumer sentiment was slightly below economists' expectations Friday morning, with the pandemic, including mental and physical health repercussions, top of mind.
President-elect Joe Biden's $1.9 trillion stimulus plan, however, which includes additional direct checks for certain Americans, should also help give spending a boost.
