U.S. consumers ended the year in a spending mood, buying all kinds of goods, from furniture to clothing, and eating out, according to the government’s latest snapshot.
The figures, announced Thursday, are a clear sign that consumers are still able and willing to shop, and the data bodes well for 2025, even as shoppers remain focused on bargains.
Retail sales rose 0.4% in December from the previous month, the Department of Commerce said, although down from November’s upwardly revised 0.8% gain.
The numbers suggest that even as many Americans struggle with higher prices and interest rates, low unemployment and rising wages are encouraging millions of consumers to spend, boosting economic growth. Last Friday, the government announced that employers increased their hiring in December and that the unemployment rate increased. fell to a low of 4.1%.
Last month’s sales growth was lower than economists forecast, “but it’s actually a strong report,” said Paul Ashworth, chief North America economist at Capital Economics. Turnover was dampened by a sharp decline in building materials stores and a slight decline in restaurants. Otherwise, most types of retailers saw solid gains.
Ashworth now expects the economy to see healthy annual growth of 2.9% in the final three months of last year, up from his previous estimate of 2.7%.
Retailers generally reported healthy sales during the winter holiday shopping period. Much of last month’s spending increase was driven by a 0.7% rise in car sales and a 2.3% rise in furniture purchases. Sales at sporting goods stores jumped 2.6%, while clothing stores saw a 1.5% increase.
The report is not adjusted for inflation, which picked up last month. The retail sales report mainly reflects sales of goods, the prices of which have been relatively moderate. Sales rose 3.9% in December compared to last year, the government said, while prices of goods rose just 0.3%.
Separately, the National Retail Federation, the nation’s largest retail trade group, said holiday sales in November and December rose by a better than expected 4% compared to the previous year, as lower inflation on holiday items encouraged shoppers to buy.
After falling sharply in 2023, inflation has remained stuck at around 2.7% in recent months, and prices are still much higher than four years ago. Still, the Labor Department said Wednesday that core prices — excluding the volatile food and energy categories — rose more slowly last month as clothing prices barely rose and apartment rental costs have increased at a slower rate.
The lower core inflation figures have revived hopes among Wall Street economists and investors that the Federal Reserve will cut its benchmark rate again this year, after three cuts last year reduced by a percentage point. percentage at around 4.3%.
The retail sales report was released as thousands of retail executives gathered this week for the National Retail Federation’s annual conference in New York to discuss issues ranging from continued shopper caution to the specter customs duties.
The conference follows a strong holiday shopping season, although consumers remain divided. Wealthier buyers, boosted by rising home values and stock investments, continue to spend more, but lower-income buyers, whose wallets are strained by continued high inflation, have pulled back . And many buyers have been more responsive to the deals, which analysts predict will continue into 2025.
“Families at the upper end of the income scale are doing more than their fair share on consumer and home improvement spending,” Greg Daco, chief economist at EY-Parthenon, Ernst & Young LLP, said Monday. . “Maybe they’re not moving, but they’re renovating and buying. Families at the bottom of the scale are a little more constrained and have more difficulty with this high price environment.
Given the challenging environment, there were clear winners and losers. Research and data firm Coresight Research counted 7,327 store closings last year, nearly 58% more than in 2023. It also documented 48 retail bankruptcies, including auto dealerships, in the states. -United last year, compared to 25 the year before.
On Wednesday, craft and fabric chain Joann filed for Chapter 11 bankruptcy protection for the second time this yearand now he is looking for a buyer. The chain operates 800 stores nationwide.
Analysts will look at retailer results next month to get a more complete picture of shoppers’ sentiment. But a handful of retailers are already offering some clues.
Cartier owner Richemont reported robust sales for the holiday quarter on Thursday. Target, which struggled with slow business early in the season, also offered some positive news. It raised its fourth-quarter comparable sales outlook, after reporting better-than-expected activity for the November and December period. He cites products as successful as toys and clothing.
But earlier this week, Macy’s Inc. and Signet Jewelers Ltd., which operate chains such as Zales and Kay Jewelers, reported disappointing holiday sales.
Retailers are also trying to figure out how to prepare for Trump’s proposed tariffs. Executives at Walmart and Best Buy have already warned that they may have to pass on higher costs to shoppers.
Tony Spring, CEO of Macy’s Inc., said at the NRF conference that in 2016 and 2017, when Trump threatened tariffs, the company diversified its sources of supply for its store brand and had worked with his partners on the production. He added that the retailer was having the same conversations again.
“We want to be able to be a good trading partner with the rest of the world,” he said. “At the same time, we want it to be an equitable relationship.”
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D’Innocenzio reported from New York.
