Retail sales fell a sizeable 1.1% in December. That is after a 1% drop in November. Consumer strength is wavering.
Why it matters: Surprising consumer strength has buoyed the economy since COVID, but it finally seems to be buckling under the weight of inflation.
The broad weakness in the spending data shows no sectors are being spared from consumers pulling back.
By the numbers: Sales were down in almost all categories of spending:
- Motor vehicles and parts dealers (-1.2%)
- Furniture stores (-2.5%)
- Electronics and appliance stores (-1.1%)
- Health and personal care stores (-0.9%)
- Gas stations (-4.6%)
- Clothing and accessory stores (-0.3%)
- General merchandise stores (-0.8%)
- Food and drinking places (-0.9%)
But: Sales were up at:
- Building material and garden supply stores (0.3%) and
- Sporting goods and hobby stores (0.1%)
Be smart: There is an ongoing shift in consumer spending from goods to services and experiences. Spending on those is not included in this data.
Overall spending may be stronger once accounting for that, but it is unlikely to be strong enough to offset the drop in spending on goods.
Bottom line: The drop in consumer spending has been long-anticipated. It is a major reason many forecasters predict a sluggish 2023.
Chief Economist, U.S. Chamber