U.S. Retail Sales Unexpectedly Stalled in December, Signaling Consumer Caution
United States retail sales unexpectedly stalled in December, according to Commerce Department data released Tuesday, suggesting consumers provided less economic firepower as the year drew to a close. The value of retail purchases, unadjusted for inflation, was little changed after a 0.6 per cent gain in November, marking a surprising pause in consumer activity.
Holiday Shopping Momentum Fades
The disappointing figures indicate the burst of activity at the start of the holiday-shopping season proved to be short-lived. Households remain frustrated over persistently high costs of living and express growing concerns about the stability of the job market, contributing to more cautious spending behavior.
Excluding auto dealers and gasoline stations, sales were also flat, highlighting broad-based weakness. Eight out of 13 retail categories posted decreases in December, including notable declines at clothing stores and furniture outlets. Sales at auto dealers fell as well, though outlays rose at building materials stores and sporting goods retailers.
Underlying Economic Concerns
The breadth of consumer spending is emerging as a significant concern for economists. While stock-market gains may be boosting spending among wealthier households, there are clear signs that discretionary spending is less robust for lower-income Americans who rely primarily on more moderate wage growth.
"The weaker-than-expected retail sales data for December won't be enough to spoil the fourth quarter," said Thomas Ryan, North America economist at Capital Economics. "But, together with the likely weakness of spending in January amid extreme winter weather in most of the country, it leaves consumption growth on track to slow sharply this quarter."
Weather Impacts and Future Outlook
Severe winter weather late last month restrained activity across much of the United States, making it difficult for economists and policymakers to gauge underlying household demand at the start of this year. Industry figures show auto sales sagged in January to the slowest annualized pace in nearly three years, while air travel suffered extensive disruptions during the same period.
The December retail sales report showed so-called control-group sales—which feed into the government's calculation of goods spending for gross domestic product—unexpectedly fell 0.1 per cent after a downwardly revised gain in the prior month. This measure excludes food services, auto dealers, building materials stores and gasoline stations.
Corporate Perspectives on Consumer Behavior
Recently, companies have indicated that consumer spending has remained uneven across demographic groups. Levi Strauss & Co. reported that despite raising some prices, the company hasn't seen a pullback in spending from its customer base. Meanwhile, PepsiCo Inc. noted that budgets remain strained for lower- and middle-income consumers, and Lululemon Athletica Inc. observed that Americans were increasingly "trading down" to more affordable options.
Despite the December slowdown, many economists expect tax refunds to underpin consumer demand early this year, potentially providing a boost to retail activity in the coming months. The mixed signals from different retail sectors and demographic groups suggest a complex economic landscape where consumer confidence remains fragile despite overall economic growth.
