U.S. December Retail Sales at 0%...Far Below Expectations

Spending Weakens Even During Year-End Shopping Season
Restaurant Sales Also Edge Down
Households Still Burdened by Living Costs

U.S. retail sales in December were flat and fell far short of expectations.

On the 10th (local time), the U.S. Department of Commerce announced that U.S. retail sales in December of last year stood at 735 billion dollars, unchanged from the previous month. It explained that consumer spending weakened somewhat even during the year-end shopping season, resulting in almost no change after a 0.6% increase in November. Sales excluding auto dealers and gasoline stations were also flat.

Retail sales are a key indicator within consumer spending, which is a major pillar of U.S. economic growth, and serve as an advance estimate that mainly tallies goods purchases within overall consumption. Economists had expected total retail sales in December to rise 0.4%, with sales excluding autos and gas also up 0.4%.

Sales declined in 8 of 13 categories, with apparel stores and furniture stores seeing particularly sharp drops. Auto dealers also posted lower sales. In contrast, spending at building-material stores and sporting-goods stores increased.

The restaurant industry, one of the most important barometers for the retail sector, saw a slight decline in sales in December. U.S. consumers tend to dine out or buy more takeout when they feel confident about the economy. Conversely, they cut back on dining out when they are anxious about their jobs.

So-called "control group" sales, which are used in the government’s calculation of goods consumption expenditures in gross domestic product (GDP), unexpectedly fell 0.1% after a downwardly revised increase in the previous month.

The stagnation in December retail sales suggests that consumer spending momentum weakened toward the end of the year-end shopping season. Economists expect tax refunds early this year to support demand, but households remain discontent with high living costs, and concerns about the labor market persist.

With the scope of consumer spending narrowing, some analysts say the K-shaped nature of the U.S. economy is deepening. According to Bloomberg, while rising stock markets and the resulting increase in wealth may boost some segments of demand, there are increasingly clear signs that low-income Americans, who rely mainly on wages, are cutting back on discretionary spending.