Retail Sales Slump in December

Retail sales fell a sizeable 1.1% in December. That is after a 1% drop in November. Consumer strength is wavering.

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Why it matters: Surprising consumer strength has buoyed the economy since COVID, but it finally seems to be buckling under the weight of inflation.

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• 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:

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• Motor vehicles and parts dealers (-1.2%)

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• Furniture stores (-2.5%)

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• Electronics and appliance stores (-1.1%)

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• Health and personal care stores (-0.9%)

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• Gas stations (-4.6%)

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• Clothing and accessory stores (-0.3%)

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• General merchandise stores (-0.8%)

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• Food and drinking places (-0.9%)

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But: Sales were up at:

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• Building material and garden supply stores (0.3%) and

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• Sporting goods and hobby stores (0.1%)

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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.

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• 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.