Retail Sales Decline 0.9% in January, More Than Expected
Consumers sharply curtailed their spending in January, indicating a potential weakening in economic growth ahead, according to a Commerce Department report released on Friday. Retail sales slipped 0.9 percent for the month from an upwardly revised 0.7 percent gain in December, even worse than the Dow Jones estimate for a 0.2 percent decline. The sales totals are adjusted for seasonality but not inflation for a month, in which prices rose 0.5 percent.
With consumer spending making up about two-thirds of all economic activity in the U.S., the sales numbers indicate a potential weakening in growth for the first quarter.
Total Retail's Take: There were a number of factors that likely contributed to the decline in consumer spending in January, including winter storms and persistent inflation. However, not all of the data that was released on Friday was negative.
“Despite the monthly decline, the year-over-year increases [up 5.44 percent unadjusted YoY in January] reflect overall consumer strength as a strong job market and wage gains above the rate of inflation continue to support spending," said NRF President and CEO Matthew Shay in a company press release. "We’re seeing a ‘choiceful’ and value-conscious consumer who is rotating spending across goods and services and essentials and nonessentials, boosting some sectors while causing challenges in others.”
Shay's colleague, Jack Kleinhenz, chief economist of NRF, offered his assessment of the January sales data: “It’s reasonable to expect some slowdown from the vigorous 2024 holiday season, so January’s numbers are not a surprise and don’t contradict the consumer spending trends we experienced. The slower spending reflects weaker payroll growth in January, and higher prices remain a challenge for most households. Cold weather in many parts of the country and wildfires in California were likely headwinds that disrupted demand and consumer patterns. Nonetheless, these results point to a stable economy and provide a solid start to 2025.”
Lastly, David Silverman, senior director, Fitch Ratings, offered his forecast for retail sales through the remainder of 2025: "We expect 2025 retail sales growth to be modest albeit positive given a still-healthy consumer, with volatility in discretionary categories due to the interplay between goods and services. Tariffs and other policy initiatives remain outstanding variables that could impact inflation and spending habits as the year progresses. Operating flexibility and the ability to respond to and invest in competitive differentiators will be key for retailers to effectively manage through the year."
