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U.S. Retail Sales Plunge In December As Inflation, Omicron Bites

The fastest inflation in nearly four decades looks to have finally hit consumer spending as December retail sales plunge amid higher prices and Omicron disruptions.

Updated at 9:35 am EST.

U.S. retail sales fell sharply last month, data from the Commerce Department indicated Friday, suggesting consumers are finally starting to pullback on purchases amid the fastest inflation in nearly forty years.

December retail sales fell 1.9% from the previous month to a collective $626.8 billion, the Commerce Department said, well behind of the Street consensus forecast of flat reading, and 19.3% higher from the COVID-hit period in the fall of last year. The November total was revised modestly lower to a gain of 0.2%, the Commerce Department report showed.

Stripping out auto and gasoline sales, December retail sales were down 2.5%, the Commerce Department report noted, compared to a Street consensus of 0.3% gain, as supply shortages, Omicron disruptions and early holiday shopping took their toll on pre-Christmas activity.

The overall numbers are terrible, but the details are all over the map (and) it’s just not possible to make a judgement like that on the basis of one month’s report," said Ian Shepherdson of Pantheon Macroeconomics. "And in any event, consumers are sitting on pandemic excess savings of $2.7 trillion -- equivalent to 4.3-months’ worth of total retail sales -- with net wealth rising in every income quintile since Covid began."

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U.S. stock extended declines following the data release, with the Dow Jones Industrial Average falling 410 points slide and the S&P 500 down 35 points. The Nasdaq fell 67 points.

Benchmark 10-year Treasury note yields eased to 1.74% following the data release while the dollar index was marked 0.1%  higher on the session at 94.952 against a basket of six global currencies.

U.S. inflation accelerated to the fastest pace in four decades last month, data from the Bureau of Labor Statistics indicated Wednesday, as surging rent, used car and travel costs continue to add upward pressure to headline readings.

The headline consumer price index for the month of December was estimated to have risen 7% from last year, up from the 6.8% pace in November and the fastest rate since June of 1982, powered largely by used and new cars and surging rental costs. On a monthly basis, inflation was up 0.5%, the BLS said, with both tallies essentially matching Wall Street forecasts.