The US consumption engine was switched off in the fourth quarter of 2020 – VP Bank column

In the US, retail sales fell 0.7% in December compared to the previous month. The decline was not expected. The previous month’s figures have been revised downwards.

The consumption frenzy of summer 2020 is over. US retail sales fell for the third month in a row, showing an overall decline in the final quarter. The so-called “control group” even recorded a significant drop of 1.9% compared to the previous month. The control group includes all US retailers with the exception of the grocery, auto, building materials, and fuel categories.

In the last few months of the year, there was a gap between the government’s first and second aid packages. Those US households that were dependent on the special government payments had to limit their consumption to the bare minimum. In addition, containment measures have a negative impact, as well as not visiting the store for fear of infection with the coronavirus.

The decline in retail sales shows how dependent the US economy is currently on government aid. Joe Biden is aware of this and is therefore daring the big hit with his USD 1.9 trillion rescue package – even if Congress will not follow the future president in parts of the plan.

The figures underline that economic growth in the fourth quarter of 2020 was extremely meager. The gross domestic product (GDP) of the USA is unlikely to have moved on balance in the months of October and November, as the monthly GDP calculated by the research specialist Macroeconomic Advisers suggests. Retail sales give little reason to hope that December made significant headway. Hopes therefore rest once more on the current year.


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