U.S. advance estimates of retail and food service sales for December 2021 tumbled from the prior month amid heating inflation, supply chain disruptions, labor issues, and the omicron variant. Retail sales recorded a seasonally adjusted total of $626.8 billion in December, a decrease of 1.9% from November. In spite of numerous macroeconomic headwinds, retail sales saw a 16.9% year-over-year increase in December, where both annual retail sales and holiday sales ended the year on a high note. Annual retail sales reached a record high in 2021 despite a plethora of economic challenges where sales were 19.4% above the 2020 total.
Supported by increasing wages fueled by a tight labor market and historic savings, similar to last year, consumers began shopping for the holiday season early, which is partially the reason why there was a decrease in sales from November to December. 2020 realized a historic holiday season which saw October's integration into the holiday shopping season as retailers began offering holiday sales sooner. 2020's elongated holiday season was good for a 3.7% year-over-year increase above the same period in 2019, despite economic challenges posed by the coronavirus pandemic. Over the same period, 2021's holiday shopping season saw a 17.1% year-over-year increase despite a decline in December as retail sales momentum carried through the holiday season. Although there were a couple of blip months for retail sales recently where consumer sentiment towards the economy, inflation, and COVID were not as optimistic, overall, retail sales were quite strong as retailers were able to deliver goods to consumers whom were shopping both in physical retail locations and online despite ongoing supply chain issues. Holiday sales and retail sales in general throughout 2021 reflect continued consumer demand that is propelling the economy. Concerning the omicron variant, consumer spending patterns that have persisted since the beginning of the pandemic may be reinforced where consumers prefer goods as opposed to services. This could result in a short-term bolstering of inflation with demand for goods elevating and supply growth trying to keep up. Nonetheless, with consumers accumulating more wealth than ever before paired with labor growth, wage gains, and some progress in regards to supply chain disruptions, consumer spending will continue to be a shining beacon as 2022 progresses.
On a year-over-year basis, all retail categories were up with retail sales increasing most in food services and drinking places (41.3%), the only services-oriented category. But, on a month-over-month basis, retail sales declined in 10 of 13 retail categories. The largest decline in regards to last month was in non-store retailers (-8.6%), which includes e-commerce sales.