By Harriet Torry and Sarah Nassauer 

U.S. consumers cut back on retail spending during the December peak of the holiday season as the country confronted a surge in coronavirus infections.

The seasonally adjusted 0.7% month-over-month drop marked the third straight decline in the Commerce Department's measure of spending at stores, vehicle dealerships, restaurants and online, after a stretch of growth last spring and summer.

Economists surveyed by The Wall Street Journal had forecast that retail sales decreased a seasonally adjusted 0.1% in December from a month earlier.

Spending declined in a number of key categories, including online purchases, bars and restaurants, electronics, groceries and department stores. Spending increased on home improvement, health and personal-care products, clothing and gasoline.

Excluding motor vehicles and gasoline, retail spending fell by 2.1% during the month.

December normally marks the peak of the holiday shopping season, but this year businesses are reporting mixed sales results. The U.S. is in the middle of an upswing in Covid-19 cases, with states such as California imposing new business restrictions and individuals limiting activities. Employers also cut jobs in December for the first time since the spring.

Real-time data shows that weakness in spending continued at the start of this year. JPMorgan Chase & Co.'s tracker of 30 million credit and debit cardholders recorded a 1.1% decline in spending from a year earlier in the week through Jan. 10.

Businesses and economists expect the next few months could be sluggish before activity picks up as more people are vaccinated and the pandemic starts to ease. Right now, infection rates remain high and vaccination programs got under way more slowly than expected.

For Eric Boyd, an airline pilot based in the Woodlands, outside of Houston, holiday shopping wasn't in the cards this year. ExpressJet, which operated feeder flights for United Airlines, first furloughed him from a training position and then it ceased operations at the end of last September.

He has been collecting unemployment aid and "burning through his 401(k)" to help support his two children -- who are 3 and 5 years old -- and cover rent. He said he didn't buy them holiday gifts, though he took them to Louisiana to visit his mother, who had purchased some decorations and toys for the children. "I think the people in my life understand given everything that has gone on," he said. "Gifts were definitely not happening this year."

Mr. Boyd was offered a new job at a cargo airline that starts next month, he said, and can just squeak by until then. "My raft is running out of air," he said. "But I can see land."

Todd Leff, chief executive of Hand and Stone Franchise Corp., which provides massage and facial spa services at 485 locations, said business had been recovering from August through November, but slowed again in December, dragged down by weakness in gift-card purchases.

"Folks were concerned about going out shopping in December and that did hurt our business," he said. Still, demand has picked up in early January, according to the CEO of the Trevose, Pa.-based business, who is optimistic that after the first quarter "more widespread vaccinations are going to see a huge uplift in pent-up demand."

There are signs that the second round of stimulus payments to households distributed under the roughly $900 billion coronavirus aid package signed into law Dec. 27 have started to boost consumer spending. NPD Group, which tracks retailers, said Thursday that sales at discretionary retailers increased 27% in the week ending Jan. 9 -- the largest lift in retail since the start of the Covid-19 pandemic.

Physical traffic to retail stores fell sharply this holiday season, according to firms that use sensors and cameras to track in-store shopping. Between Nov. 22 and Jan. 2, store traffic fell 33% year-over-year, according to Sensormatic Solutions, which uses cameras and software to track visits to thousands of malls and shopping centers. By contrast, in November and December online sales grew 32.2% year-over-year to $188.2 billion, according to Adobe Analytics.

Retailers also pushed holiday deals earlier into October, aiming to reduce store crowding throughout the season and smooth e-commerce supply-chain bottlenecks.

"You are sitting at home. You don't know what's happening in the world and for me the most comforting thing to do is to curl up in front on my screen and shop," said Sequoia Ross, a 43-year-old owner of a frozen cookiedough company. She said she bought all her Christmas and Kwanzaa gifts online for the first time this winter, avoiding stores where people might not be masked or distanced.

Ms. Ross, who lives in Richmond, Va., said she spent more on gifts compared with last year. During the pandemic, the family is saving money on travel and entertainment, the mother of four said, so splurged on gifts such as iPads, iPhones and computers. "I felt that if this was going to be our new life, then we would need up-to-date technology."

Retailers have so far reported mixed holiday sales results. Companies that sell in-demand pandemic products, such as food, fitness gear and home goods, continued to see outsize sales gains.

Albertsons Cos., which owns the Jewel-Osco and Safeway chains, reported strong sales in the quarter ended Dec. 5, as consumers continue to buy more groceries than usual during the coronavirus pandemic.

Lululemon Athletica Inc. and Lands' End Inc. this week joined a list of companies raising financial guidance for the fourth quarter. Both said they benefited as consumers turned to comfortable clothing during the pandemic. Meanwhile, Nordstrom Inc.'s net sales fell roughly 22% for the nine-week holiday period ended Jan. 2, compared with the same period a year ago.

Margaret Burns, a 42 year-old mother to three boys who lives in Mount Olive, N.J., said she spent more on Christmas gifts, in part to compensate for the year's difficulties, including remote schooling and isolation from many friends and family.

"We overdid it because of the kind of year these kids had," said Ms. Burns. Her children received motorized dirt bikes, videogames, an iPhone, AirPods and virtual reality sets. The family "used the money we didn't spend on vacations," she said.

--Suzanne Kapner and Hannah Lang contributed to this article.

Write to Harriet Torry at and Sarah Nassauer at


(END) Dow Jones Newswires

January 15, 2021 09:03 ET (14:03 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.