Retail Sales End 2023 on Solid Note, but Expectations Are Downbeat for 2024

January 10, 2024

The nation’s retailers ended the holiday season with solid sales gains, according to the National Retail Federation’s (NRF) Retail Monitor report for December, but the organization warns that similar gains are “not necessarily sustainable” in the coming year.

The Retail Monitor, which excludes auto and gas sales, climbed 0.4% in December, down from a 0.8% gain in November when the holiday shopping season kicked off. The gauge’s long-term average growth is 0.6%.

The impact of higher interest rates and a slowing housing market weighed on the month’s sales. The only categories that saw weaker sales were electronics and appliances, building and garden supplies, and home furnishing and furniture. These categories are housing-related and typically financed. 

On a year-over-year basis, November and December were up 3.7% from the same period in 2022. Consumer spending remained remarkably resilient throughout the year in the face of higher interest rates and still-elevated inflation, but economists from the NRF warned that the tailwinds that kept consumers spending are unlikely to persist in 2024.

Recent reports point to an increasingly strained consumer. Last year saw credit card debt spike to a record high of $1.08 trillion, according to the latest quarterly report from the Federal Reserve Bank of New York. A separate report from Bankrate found that credit card balances have jumped 40% over the course of the year, and 49% of American consumers carry a balance from month to month, up from 46% a year prior.

Part of what has sustained consumers’ ability to keep spending is the robust labor market, but hiring growth is widely expected to cool in the coming year and the unemployment rate is expected to rise. The NRF expects a cooling labor market to impact spending decisions. NRF economists note that “spending is elevated relative to current income, and maintaining the recent pace of growth will be increasingly difficult.”

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