Retail sales continued to decline in December as shoppers grappled with inflation
That’s until 2022 to spend in America.
On Wednesday, the US Commerce Department said retail sales continued to decline in December, falling 1.1% as inflation remained high.
This is the largest monthly decline since December 2021, and virtually every category (except building materials, food and sporting goods) saw sales decline compared to the previous month.
Economists had expected sales to fall 0.8% in the month, according to Refinitiv. The figure for November was revised up to -1%.
Overall, the final retail sales report for 2022 shows the end of the holiday season shifting to October rather than the traditional November and December.
October was the last strong retail sales month of 2022, as discounting and slowing inflation prompted consumers to buy more, said Kayla Brun, an economic analyst at Morning Consult.
“I think it will hopefully bring some momentum to the holiday season,” he said. “But really, it was just a modest early hit that took away some of the losses that could have happened in November and December.”
The Commerce Department’s retail sales data, not adjusted for inflation, rose to a 40-year high in June before falling in the second half of 2022 to 6.5% over the period. 12 months ending in December according to the latest consumer price index. study published last week.
Wholesale price growth is also slowing significantly: The December producer price index was 6.2%, according to Bureau of Labor Statistics data released Wednesday.
Retail sales during the November and December holiday season rose 5.3 percent from 2021 to $936.3 billion, the National Retail Federation said Wednesday.
Total job vacancies, which are not adjusted for inflation and exclude sales at car dealerships, gas stations and restaurants, were lower than trade association forecasts for a 6-8% increase in holiday sales.
“We knew that recent holiday sales could be difficult, given the early buying in October that pushed some sales forward, as well as price pressure and cold, stormy weather,” said Jack Kleinhenz, NRF chief economist. “The pace of spending has been sharp and consumers may be holding back more than we expected, but these numbers show that they have navigated a challenging, inflation-driven environment well. consumers still engage and buy despite everything else going on around them.
Consumer spending has been strong despite inflation, rising interest rates and the threat of recession. However, some economic data suggests that activism is running out of steam and Americans are running out of dry powder.
“I think consumers have become very active in managing their family budgets and what they’re willing to spend,” said Matt Cramer, KPMG’s national leader in consumer and retail. “They spend more time looking for deals and thinking when shopping.”
This is reflected in monthly sales declines in categories such as automobiles, which fell 1.2% from November; furniture, down 2.5%; Electronics fell 1.1% after Wednesday’s report.
“Obviously, with these big purchases, those financed purchases where the interest rates are going to be, consumers are going to be reluctant to make those decisions and extend their buying cycles across a broader range of categories,” he said.
The coming months are traditionally the slowest for retailers, but headwinds such as credit card debt and lingering inflation could exacerbate that, said Ted Rossman, senior industry analyst at Bankrate.
“A further slowdown in purchases is likely, at least in the near term,” Rossman said in a statement.
Discretionary spending is usually the first to disappear, with people typically cutting back on travel, dining and other expenses, said Amanda Belarmino, assistant professor of hospitality at the University of Nevada, Las Vegas.
However, in 2022, the reduced demand after the pandemic, which caused huge costs for services, is still strong. In December, spending on food services and drinking establishments increased by 12.1% from a year ago.
“What we’re seeing in restaurants, tourism, hospitality is the exact opposite of what we typically see in an economic downturn,” Belarmino said. “We’ve seen consumers continue to make those expenditures. But when you see these slowdowns, it’s like people canceling their streaming services, canceling Peloton, canceling their home services. So consumers seem to make these trade-offs.
However, changes in dumping activity may be a harbinger of changes to come.
“The average withdrawal rate in the United States has fallen to about 18% to 20%, with some figures going as low as 15%,” Belarmino said. “It’s not huge, but it’s a way for customers to save money.”
Morning Consult’s Bruun said spending activity in service industries will be a key indicator in the months ahead, adding that a strong labor market should help prevent a sharp decline in spending.
“It was the consumer spending component that drove the growth,” he said. “And that’s going to happen in the future because we’ve really seen demand for commodities pick up significantly.”
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