Retail sales fell in December, a slowdown in a robust holiday shopping season.
Despite a decline of 1.9 percent in the final month of the year, sales for the fourth quarter of 2021 jumped 17.1 percent as consumers began their holiday shopping earlier.
Shoppers at an Apple Store in Manhattan last month.Credit…Karsten Moran for The New York Times
Retail sales fell 1.9 percent in December, the Commerce Department reported on Friday, reflecting a slowdown during an otherwise robust holiday shopping season that started earlier in the year for many consumers.
It was the first drop after four straight months of sales increases, though the gain in November slowed from October because of the lengthened holiday shopping season brought on by fears of product shortages and price increases. Total sales for October through December were up 17.1 percent from the same period a year earlier, according to the report.
Beth Ann Bovino, chief U.S. economist at S&P Global, said that although there was bound to be “headline shock” over a weaker number, the broader picture for retail sales has been strong over the past few months.
“This is not a sign of consumer weakness,” said Ms. Bovino, who had forecast a decline. “Given that households have relatively strong balance sheets with high savings levels and a strong job market with wages climbing higher, it seems that consumers are not necessarily closing their pocketbooks. They’re taking a brief pause.”
Monthly retail sales
The retail sales report provides a data point on the mind-set of consumers after a report this week showed that inflation climbed to its highest level in 40 years at the end of 2021. Prices have increased as new variants of the coronavirus have exacerbated supply chain issues and robust consumer demand for goods. At the same time, the Omicron wave has caused widespread staffing shortages and may have played a role in diverting some consumers from stores and holiday gatherings.
Economists at Morgan Stanley had forecast retail sales to rise by 0.4 percent in December. Even though inflation topped the coronavirus as the No. 1 concern for consumers it surveyed in November, that “came with no dent to spending plans,” they said in a note last week.
Instead, the holiday shopping season appeared to break records and lower-income consumers seemed to be operating with relatively better buying power, the economists wrote. At the same time, they anticipated that the Omicron wave drove more spending to goods rather than services.
The pandemic has continued to shape consumer habits in the United States.
Fewer people shopped in stores this holiday season, even though the Omicron variant did not become a prominent threat until December. Retail foot traffic in the United States was down 19.5 percent between Nov. 21 and Jan. 1 compared with 2019, according to Sensormatic Solutions. That was a slight improvement from the depths of the pandemic in 2020, when foot traffic was down 33.1 percent in the same period compared with 2019, but still a significant change.
Fewer people shopped in stores this holiday season, with more consumers relying on e-commerce.Credit…Justin Sullivan/Getty Images
As retailers grapple with inflation and supply chain issues, it has given an additional advantage to the biggest U.S. retailers. They had already benefited during the pandemic by being able to remain open while others closed, from the variety of goods that they carry and through initiatives like curbside delivery.
“We’re talking about the Walmarts and Targets and Costcos, the big players,” said Mickey Chadha, a retail analyst at Moody’s Investors Service. “They’ve leased their own ships and they’re bringing in product. They have a lot more power with vendors to get priority. And they actually planned ahead as well.”
At the same time, Mr. Chadha said, they have not had to raise their prices as much as smaller retailers, and are likely to benefit as lower-income consumers search for value to stretch their dollars.
“They are taking market share because they have the ability to price lower and absorb that hit to the margin a lot better than some of the smaller, weaker retailers,” he said.
Costco, for example, said on a December earnings call that it believed it was successfully managing the effects of inflation through its relative purchasing power and its relationships with vendors. That often meant that Costco and its suppliers were each taking less in the way of price markups, Richard Galanti, the company’s chief financial officer, said on the call.
“We’ve always said we want to be the last to raise the price and the first to lower the price, recognizing there’s a limit to what you can do based on these cost increases,” Mr. Galanti said.
Costco also acknowledged that although it was grappling with unavoidable supply chain issues, including delayed container arrivals on the West Coast, it felt “pretty good about staying in stock.”
Plenty of other retailers have said that supply chain issues cut into their revenue last year, as pandemic-related factory closures in Vietnam and shipping delays kept goods from American shelves and warehouses.
“Holiday was weaker than expected as units that were slated to arrive in December did not clear through the ports in the time frame we had anticipated,” Fran Horowitz, chief executive of Abercrombie & Fitch, said at a conference on Tuesday. “This was beyond our control and resulted in a miss of sales during the peak selling period. Beyond those delayed units, we also experienced renewed Covid-related restrictions globally.”
Still, some retail executives have said that they would rather have a supply issue than a demand issue, particularly given the sharp ebbs and flows in consumer preferences in the past 18 months. And it is not yet apparent whether price increases are tamping down demand given the quarterly performance.
Ms. Bovino of S&P said that she anticipated consumer spending to remain robust in the short term, particularly given the attitude about pricing during the holidays.
“Households seem to forgive retailers for their very high prices,” she said. “It’s been almost two years — they wanted to celebrate.”
Ms. Bovino added that she expected more selective purchasing to take hold later this year as savings accounts begin to deplete and consumers “remember what prices used to look like.”
January retail sales may also be affected by shortened store hours and closures as the Omicron wave causes widespread staffing shortages in multiple industries. That data will provide a better picture of how consumers are responding to inflation.
JPMorgan Chase closed out a bumper year that yielded a record $48.3 billion in profit in 2021, while reporting lower quarterly earnings despite the performance of investment bankers who raised money for companies and arranged corporate deals.
The bank, the country’s largest by assets, reported flat revenue compared with the final quarter of 2020, although profit fell 14 percent to $10.4 billion in the three months ending in December. Even so, its earnings of $3.33 a share surpassed analysts’ expectations.
Much of the decline was a result of the bank raising pay and spending more on technology, the company said in its earnings statement.
“The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks,” Jamie Dimon, JPMorgan’s chief executive, said in a statement. “We remain optimistic on U.S. economic growth as business sentiment is upbeat and consumers are benefiting from job and wage growth.”
The company’s investment bankers capped a blockbuster year with a 37 percent jump in fees, while revenue for the banking unit surged 28 percent to $5.3 billion. Its asset and wealth management division also benefited from higher management fees and growth in deposits and loans.
But there were also laggards: Profit for the bank’s consumer division, which caters to Main Street customers, fell 2 percent to $4.2 billion. Revenue from trading fell 11 percent from a record fourth quarter a year ago, to $5.3 billion, but was still up compared with the same period in 2019.
Like JPMorgan, Citigroup reported lower fourth-quarter profit. Even so, its annual profit nearly doubled to $21.9 billion.
Net income slid 26 percent to $3.2 billion in the quarter, but still exceeded analyst forecasts. In an effort to streamline its business, the company is selling some overseas units. On Thursday, it announced a $3.6 billion sale of consumer operations in Indonesia, Malaysia, Thailand and Vietnam to UOB Group. It is also exiting from Mexico’s retail market.
Wells Fargo bucked the trend: Its fourth-quarter net income increased 86 percent to $5.8 billion, beating analyst expectations. And full-year profit rose to $21.5 billion in 2021 — more than six times that of 2020, when the company stockpiled rainy-day funds in case of a surge in loan defaults that did not materialize.
“Everybody seems to be getting more and more confident that the recovery is continuing,” Michael P. Santomassimo, the company’s chief financial officer, said on a conference call. Given consumer spending and business activity, “we’re optimistic,” he said.
Bank stocks have risen 12 percent in the past month as investors predicted the Federal Reserve would raise interest rates this year to get inflation under control. Rising rates would clear a path for banks to increase profits because they can charge customers more in interest.
Executives at the nation’s biggest lenders have been upbeat about the economy in recent months, particularly during periods that the pandemic ebbed. They remained optimistic Friday, but acknowledged the potential for disruptions from rising inflation and the Omicron variant of the coronavirus, which has caused staffing shortages in schools and businesses.
Inflation rose to the highest level in four decades at the end of last year. Rising prices have knocked consumer confidence and made businesses more uncertain about the future of the pandemic-stricken economy.
Three other major U.S. lenders — Bank of America, Goldman Sachs and Morgan Stanley — report their earnings next week.
Citigroup’s unvaccinated staff members in the United States have rushed to get shots — or request exemptions — just before its coronavirus vaccination requirement kicks in.
The bank reached 99 percent compliance with its mandate before a Friday deadline, Sara Wechter, the bank’s head of human resources, wrote on LinkedIn on Thursday. That was up from 90 percent on Jan. 7, according to a person familiar with the policies who spoke on condition of anonymity to discuss personnel matters.
The figures excluded branch workers who had been given more time to comply, employees who received medical or religious accommodations and those who live in states that do not permit vaccine mandates.
“Going into the last day, we expect the number of employees who have not complied will decrease even further,” Ms. Wechter wrote.
Citigroup announced earlier this month that unvaccinated employees would lose their jobs by the end of the month. And some may not receive year-end bonuses unless they sign documents agreeing not to sue the company, according to the person familiar with the policies.
The bank has been more assertive than its Wall Street peers on the thorny issue of vaccines. The Supreme Court on Thursday blocked the Biden administration from enforcing a vaccine-or-testing mandate for large employers, dealing a blow to a key element of the White House’s plan to address the pandemic as virus cases surge.
All over the world, families finding themselves with more time at home because of the pandemic have responded by buying more furnishings, consumer electronics and other goods made in China.
Those purchases pushed China’s trade surplus to its highest level ever last year, according to data released on Friday by the Chinese government. The country’s surplus in December also shattered by a wide margin the record for the highest single month, set only two months earlier.
China’s trade surplus reached $94.5 billion in December, breaking the previous record of $84.5 billion, set in October. The country’s trade surplus for all of last year climbed to $676.2 billion.
Monthly China trade balance
China has carefully managed its trade in recent years. Xi Jinping, the country’s leader, has called for China to become more self-reliant and avoid dependence on imports.
Beijing has particularly focused on developing globally competitive manufacturing industries while importing mostly raw materials, so as to create as many well-paid jobs as possible within China’s borders. The government has also focused during the pandemic on helping Chinese companies become more competitive, while avoiding subsidies for consumers.
By contrast, governments in the West have put more emphasis on providing direct subsidies to consumers, who have used part of the money to buy more manufactured goods from China.
Chinese officials on Friday applauded the latest trade data, saying that it fulfilled the country’s goals. “In general, the 14th Five-Year Plan foreign trade has achieved a good start,” Li Kuiwen, the director of the Statistics and Analysis Department of China’s General Administration of Customs, said at a news conference in Beijing.
At the same time, a widening trade deficit with China has become a serious drag on growth in the United States and the European Union and has become a source of political friction.
Nearly half of China’s trade surplus in December was with the United States. The bilateral imbalance in December was $39.2 billion, slightly trailing the previous record of $42 billion, set in September.
President Donald J. Trump concluded a Phase 1 trade agreement in January 2020 that called for a sharp increase in China’s imports from the United States in 2020 and 2021, followed by further increases from 2022 through 2025. China fell short of the promised increases in the first two years of the agreement. Chinese experts have said that the pandemic interfered with normal trade flows.
China will not release until Monday its full-year statistics on total economic output. But estimates by Western economists, based on data through November, indicate that the widening of the trade surplus is now the main engine keeping China’s economy going, as real estate and other sectors falter.
President Biden plans to nominate three new Federal Reserve officials as he seeks to remake the central bank at a critical economic moment, a White House official familiar with the matter said on Thursday.
If confirmed, his picks would result in the most diverse Fed board in the institution’s history, Jeanna Smialek reports for The New York Times.
The White House plans to nominate Lisa Cook, an economist at Michigan State University who has researched racial disparities and labor markets, and Philip Jefferson, an economist and administrator at Davidson College, to open seats on the Fed’s Board of Governors. Both Ms. Cook and Mr. Jefferson are Black.
Mr. Biden will also nominate Sarah Bloom Raskin to serve as the Fed’s vice chair for supervision, a job created to help police the nation’s largest banks after the 2008 financial crisis.
Mr. Biden had previously nominated Jerome H. Powell for a second stint as Fed chair and Lael Brainard, now a governor, as vice chair of the central bank. If they are confirmed to their posts, the seven-person Fed board would have four women, one Black man and two white men — the most diverse team in the Fed’s roughly 108 years of existence.
The administration had promised to make the Fed — historically dominated by white men — look more like the public it served, and prominent lawmakers have pushed for a focus on tougher financial regulation. The picks seek to deliver along those dimensions. READ THE FULL ARTICLE ->
Google said Friday that it would spend $1 billion to purchase a London office building, making it the owner of another high-priced piece of real estate as the internet giant bets on an eventual return to office for its employees around the world.
The company said it would buy a building in London’s West End where it had already been leasing office space. The purchase is on top of another $1 billion that Google is estimated to be spending to construct an 11-story, one-million-square-foot building less than two miles away that looks like a horizontal skyscraper and will have a rooftop garden and running track.
The purchases in London, one of the world’s most expensive cities for real estate, will give Google the capacity to hold up to 10,000 employees across Britain.
The world’s largest tech companies have used flush balance sheets to become major buyers of global real estate. In September, Google announced it would spend $2.1 billion on a Manhattan office building. Apple, Meta and Amazon have also been buying up property in the United States and abroad.
Google said the purchase of the London office is part of a broader vision for a “flexible workplace,” where people can work from home and spend a few days per week in the office.
The investment, Google said in a blog post, “represents our continued confidence in the office as a place for in-person collaboration and connection.”
In November, the month before Omicron swept through Britain, the nation’s economy reached a milestone: It surpassed its prepandemic size for the first time.
Gross domestic product increased 0.9 percent in November from the month before, according to the Office for National Statistics, with the construction and manufacturing sectors returning to growth as some businesses were less disrupted by supply shortages. Wholesale and retail businesses were also important contributors.
And so, the economy was 0.7 percent larger than it was in February 2020, before the pandemic plunged Britain into a deep recession.
If the economy does not shrink by more than 0.2 percent in December, and there are not more data revisions, then the quarterly G.D.P. for the last three months of the year, the more conventional statistic, will also surpass its prepandemic levels, the statistics office said.
But the British economy is expected to take a hit in December. Omicron pushed coronavirus cases to record highs, the government instructed people to work from home, restaurants and bars faced mass cancellations, staff shortages were rampant and the Treasury had to revive some pandemic financial support for businesses.
In December, the Bank of England cut its growth forecast for the fourth quarter by half a percent, which would leave the economy 1.5 percent smaller than its prepandemic size. The central bank added that measures from the government and voluntary social distancing would weigh on the economy in the first quarter.
Although the daily number of Covid cases is falling again in Britain, the economy faces other hurdles in the next few months. Households face a notable increase in the cost of living as inflation is expected to peak at about 6 percent in the spring, energy bills are set to rise significantly and tax increases are looming.
“Omicron looks set to fade almost as quickly as it arrived, thanks partly to the rapid rollout of booster jabs,” Samuel Tombs, an economist at Pantheon Macroeconomics, wrote in a note to clients. He said he expected economic output to bounce back in February.
But growth from the middle of the year “likely will be sluggish, as households’ real incomes are squeezed by high inflation and taxes, and exports remain constrained by Brexit,” he added.
The Supreme Court on Thursday blocked the Biden administration from enforcing a vaccine-or-testing mandate for large employers, parts of which were set to go into effect on Monday.
The government could try again with a new rule.
Devising a more tailored emergency rule for a specific set of higher-risk companies, addressing the court majority’s criticism of the employer mandate as a “blunt instrument,” could be quick. Or the agency could use the traditional rule-making process, but that might take years.
Employers can still enforce their own mandates, but it may be more fraught.
The blocking of a federal rule subjects larger employers to a patchwork of city and state vaccine rules, which would have been pre-empted by a single federal rule. New York City, for example, requires all on-site workers to be vaccinated, while Florida passed a law banning such requirements. And the administration’s separate mandate for federal contractors is on hold and likely headed to the Supreme Court, too. Some companies, like Boeing, have delayed mandates until its fate is certain, while others, like Citigroup, have said they are going ahead regardless.
Companies that were on the fence now probably won’t introduce mandates.
A spokesman for Macy’s, which began to request the vaccination status of its employees this month, said the retailer was “evaluating this late-breaking development.” In a November poll of companies by Willis Towers Watson, about a third of respondents said they planned to mandate vaccines only if the government’s now-discarded rule took effect.
Health experts said the ruling would exacerbate existing divides.
Many white-collar employees can remain at home, while blue-collar workers who have to conduct business in person must venture out. “This decision will be an excuse for those employers who care less about their employees to return to business as usual,” said David Michaels, an epidemiologist and a professor at George Washington University who is a former administrator for the Occupational Safety and Health Administration.
Dr. Megan Ranney, an emergency physician and the associate dean at Brown University’s School of Public Health, said that with about 30 percent of adults in the United States unvaccinated, “I worry that those folks are going to continue to not get vaccinated, unless an awful lot of employers decide that this is in their best interest to put in place.”
Shares of the French state-controlled utility ?lectricit? de France fell by as much as 24 percent on Friday after the government announced measures to protect retail customers from energy price rises. The company estimated that the impact of these measures on its financial performance could be as much as 8.4 billion euros ($9.6 billion). The company also announced that the shutdowns of five nuclear plants to fix defects would be extended.
Germany’s economy weathered supply chain shortages and delivery bottlenecks to expand by 2.7 percent last year, the country’s statistics office said Friday, but a weak final three months could foreshadow a decline in the near term, analysts warned. Overall growth in gross national product in 2021 was more than expected, but output remained 2 percent lower than in 2019, before the pandemic. Despite the lack of hard data for December, analysts cautioned that a resurgence of Covid infections along with fresh restrictions on shopping and entertainment pointed to the start of a possible recession at the end of the year, with the economy not picking up again until the second quarter of 2022.
Microsoft has selected a law firm to review its sexual harassment and gender discrimination policies, the company’s board announced on Thursday, after shareholders raised alarms about how Microsoft and Bill Gates, one of its founders, had treated employees, especially women.
The board said it had chosen Arent Fox, based in Washington, D.C. Microsoft said the firm had never done employment-related work for it in the past.
Shareholders passed a resolution during the company’s 2021 annual meeting to review the policies Microsoft has in place for its employees to protect them against abuse and unwanted sexual advances.
The resolution passed with support from almost 78 percent of Microsoft’s shareholders. It was the only of five proposals on ethical issues put forth by shareholders to succeed. Others, like a call for a report on race- and gender-based pay gaps at the company and a pledge to prohibit sales of facial recognition to government entities, failed.
“Microsoft is under intense public scrutiny due to numerous claims of sexual harassment and an alleged failure to address them adequately and transparently,” the text of the resolution said. “Reports of Bill Gates’s inappropriate relationships and sexual advances toward Microsoft employees have only exacerbated concerns, putting in question the culture set by top leadership and the board’s role holding those culpable accountable.”
Mr. Gates solicited at least two employees while he was running Microsoft, according to reports in The New York Times and The Wall Street Journal. In one incident, in 2007, Mr. Gates sat through a presentation by a Microsoft employee, then immediately emailed her to ask for a date. Microsoft leaders later warned Mr. Gates not to do things like that. In 2019, Microsoft’s board received a letter from an engineer claiming to have had a sexual relationship with Mr. Gates in 2000. A spokeswoman for Mr. Gates confirmed that the two had had an affair that “ended amicably.”
Satya Nadella, Microsoft’s chief executive, said in a statement on Thursday that workplace culture was Microsoft’s “No. 1 priority.”
“We’re committed not just to reviewing the report but learning from the assessment so we can continue to improve the experiences of our employees,” he said.
Karen Weise contributed reporting.