December’s weak retail sales numbers and other economic indicators have caused concern because they seem to show a national economy that could be tottering on the edge of a major decline.
Throughout 2021, it looked like the economy was progressing but was plagued by persistent hiccups – moving forward at the pace of two steps forward and one step back. But appearances can be deceiving, and it now seems as though we may have spent the past year dancing on a precipice.
Retail sales as defined by the National Retail Federation – which exclude automobile dealers, gasoline stations and restaurants – were down 2.7% seasonally adjusted in December from November.
The U.S. Census Bureau reported that overall retail sales in December – which included autos, gas and restaurants – were down 1.9% seasonally adjusted from November
Making matters a bit confusing, NRF also reported record holiday sales looking at seasonal purchases made during the period of October through December, although many consumers started their Christmas buying even earlier last year.
It also seems that consumer optimism, which was up for most of 2021, suffered towards the end of the year with the continued battering by the Omicron variant of Covid 19, employment woes, and the stubborn continuation of inflation growth.
Wholesale prices jumped 9.6% in 2021, while the Consumer Price Index grew 7.0% from December 2020 to December 2021. However, the process has been more volatile than the annualized numbers suggest, with price surges suddenly hitting everything from soaring container shipping costs to yoyoing lumber prices.
There was good economic news in 2021, which early on saw a vigorous economic recovery following the dark days of 2020, when we were plagued by a wave of Covid-related shutdowns and lockdowns. The Gross Domestic Product grew an estimated 8.4% in 2021, but the pace slowed towards the end of the year.
In addition to inflation, the country has been negatively impacted by the strange employment picture, where unemployment is rising at the same time that many employers are having trouble finding willing workers, including warehouse operators and trucking companies.
The absence of willing workers also has been a contributing factor to the ongoing supply chain crisis. A population who had learned to take for granted a smooth distribution system now knows what a complex and highly sensitive system this is, and they are continuing to learn fresh lessons each day as grocery and other retail stores offer stark displays of empty shelves.
New home sales in November were down 14% from the previous year, and October sales were revised to the lowest level since the start of the pandemic, according to the most recent report. Existing home sales were down 4.6% in December
Another factor steadily eroding confidence is the paucity of leadership, shown by Biden’s over-promising in addressing supply chain problems. Opening up the Ports of Long Beach and Los Angeles to 24-hour operations offered only slight help given other issues, including a shortage of truckers and the large number of containers out of place and cluttering port facilities.
That didn’t stop the Biden administration from crowing about the few small improvements that did take place, even while ships were still waiting to unload Halloween costumes in December.
Looming ahead are port employers’ negotiations over a multiyear collective bargaining agreement with the West Coast longshoremen’s union. The last time this happened, the longshoremen engaged in a months-long work slowdown that snarled port traffic and eventually required direct intervention by President Obama.
The administration’s success in getting its infrastructure legislation passed will bring welcome improvements to highways, bridges and port facilities, but most of them will take years to complete before they can have a beneficial effect on the country’s supply chain.
While The Conference Board’s consumer confidence measurement rose in October and December following a precipitous decline earlier in the year, On Dec. 22, TCB said, “Looking ahead to 2022, both confidence and consumer spending will continue to face headwinds from rising prices and an expected winter surge of the pandemic.”
While we don’t have the board’s reading for January yet, the University of Michigan Consumer Sentiment Index (MCSI) recorded a dip of 2.5% in early January from its level in December 2021, according to preliminary results released Jan. 14.
This estimates consumer views in just one state, but Michigan’s residents share many of their fellow Americans’ concerns, including the Omicron variant and inflation, and they expect bad economic times ahead. And their confidence in government economic policies is at its lowest level since 2014.