In the final month of the year, U.S. consumer spending experienced an unexpected pause, with retail sales holding steady rather than growing as had been anticipated. The Commerce Department released data indicating that total retail sales for December did not change from the previous month. This figure marked a significant deceleration when compared to November's 0.6% increase and contrasted with forecasts that had anticipated a 0.4% rise in sales.
These retail sales statistics have been seasonally adjusted to account for regular fluctuations typical in the period, yet they remain unadjusted for inflation, which continues to be elevated. Notably, the release of the December figures had been postponed by a month due to disruptions caused by a government shutdown the previous year.
Examining the breakdown of categories tracked by the Commerce Department reveals widespread decreases, with most sectors registering declines. Two particular retail sectors experienced the sharpest drops: furniture stores and so-called miscellaneous stores, each seeing a 0.9% reduction in sales. Conversely, a few categories saw modest growth, most notably home improvement stores, which increased retail sales by 1.2% in December.
Analysts often focus on a category of retail sales data known as the 'control group,' which excludes volatile components and better reflects underlying consumer demand trends. According to data compiled by FactSet, this control group measure dropped by 0.1% in December, a figure lower than the 0.4% growth that economists had projected previously.
The broader context includes a deceleration in U.S. hiring over the past year and a deterioration in consumer sentiments regarding economic conditions. Additionally, inflation rates have remained persistently high. Despite these factors, consumer spending had not declined prior to this report, marking the December stagnation as a potential turning point. The flat retail sales reading may indicate that constraints on consumer expenditure are beginning to manifest, highlighting emerging pressures in household financial behavior.
The situation remains dynamic, and further updates are expected as new data become available.