Retail Sales Declined in December, As Consumers Struggle with Inflation

January 19, 2023

Retail spending declined in December at the fastest pace of 2022, ending the holiday shopping season on a sour note, as higher interest rates, persistent inflation, and concerns about an economic slowdown weighed on American consumers.

Retail sales, which include purchases at stores, restaurants and online, declined a seasonally adjusted 1.1% in December from the prior month, according to the Commerce Department. November’s sales data was also revised lower, and sales have declined in three of the past four months.

Commerce Department numbers are not adjusted for inflation, so the sales downturn reflects both receding inflation and tepid consumer demand during the holiday shopping season.

Higher interest rates also led to a steep decline in the sales of big-ticket items like furniture and vehicles, which are sensitive to higher borrowing costs. Furniture and home furnishings were down 2.5%, and motor vehicles and parts dealers fell 1.2%.

The only categories that saw retail sales growth in December were grocery stores, amid still high food inflation, and home improvement stores, likely driven by the spate of winter storms that have battered parts of the country.

Despite the slowdown at the end of the year, on a year-over-year basis, retail sales were up 6%. However, that is 0.5% lower than the headline inflation rate.

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