United States
unexpectedly stalled in December, suggesting
provided less firepower
as the year drew to a close.
The disappointing figures indicate the burst of activity at the start of the
proved to be short-lived. Households remain frustrated over a high cost of living and worried about the job market.
The value of retail purchases, unadjusted for inflation, was little changed after a 0.6 per cent gain in November, Commerce Department data showed Tuesday. Excluding auto dealers and gasoline stations, sales were also flat.
Eight out of 13 retail categories posted decreases, including declines at clothing stores and furniture outlets. Sales at auto dealers also fell. Meantime, outlays rose at building materials stores and sporting goods
.
The breadth of
is also a concern. While stock-market gains may be boosting spending among wealthier households, there are signs discretionary spending is less robust for lower-income Americans relying primarily on more moderate wage growth.
Meanwhile, severe winter weather late last month that restrained activity across much of U.S. will make it difficult for economists and policymakers to gauge underlying household demand at the start of this year. Industry figures show auto sales sagged in January to the slowest annualized pace in nearly three years, while air travel suffered extensive disruptions.
“The weaker-than-expected retail sales data for December won’t be enough to spoil the fourth quarter,” Thomas Ryan, North America economist at Capital Economics, said in a note. “But, together with the likely weakness of spending in January amid extreme winter weather in most of the country, it leaves consumption growth on track to slow sharply this quarter.”
That said, many economists expect tax refunds to underpin demand early this year.
The December retail sales report showed so-called control-group sales — which feed into the government’s calculation of goods spending for gross domestic product — unexpectedly fell 0.1 per cent after a downwardly revised gain in the prior month. The measure excludes food services, auto dealers, building materials stores and gasoline stations.
Recently, companies have indicated that consumer spending has remained uneven across demographic groups. Levi Strauss & Co. said that despite raising some prices, the company hasn’t seen a pullback in spending. PepsiCo Inc. said budgets remain strained for lower- and middle-income consumers, while Lululemon Athletica Inc. noted that Americans were “trading down.”
Delinquencies on loans ranging from mortgages to credit cards rose in the fourth quarter to the highest level since 2017, driven by higher defaults among lower-income and younger borrowers, according to Federal Reserve Bank of New York data out Tuesday. The share of credit-card balances at least 90 days past due climbed to 12.7 per cent, the largest since 2011.
In the wake of the latest retail sales data, the Atlanta Fed’s GDPNow model sees household spending contributing 1.63 percentage points to fourth-quarter growth, less than what was previously forecast.
Since the retail figures aren’t adjusted for inflation, weaker figures could be impacted by steep holiday discounts. The data largely reflect purchases of goods, which comprise roughly a third of overall household spending.
What Bloomberg Economics Says…
“Given the lively pace of consumer spending heading into the
, December’s softer figures probably mean sales were pulled forward, rather than reflecting weaker demand. We expect underlying demand to remain solid early in 2026 as larger tax refunds and positive wealth effects support spending.”
— Eliza Winger, economist
Spending at restaurants and bars, the only service-sector category in the retail report, eased 0.1 per cent after jumping the previous month.
Inflation-adjusted spending data on goods and services for December will be released on Feb. 20.
Separate data out Tuesday showed growth in labour costs eased in the fourth quarter. The employment cost index, a broad gauge of wages and benefits, increased 0.7 per cent in the three months ended in December, the smallest advance since 2021, according to the Bureau of Labor Statistics.
—With assistance from Augusta Saraiva, Jarrell Dillard, Molly Smith and Chris Middleton.