Retail sales fell 1.1% in December, unadjusted for inflation, with consumers cutting back spending in almost all sectors except food, clothing and hobby stores, according to data from the U.S. Census Bureau Wednesday.
Consumers pulled back spending most aggressively on gasoline, furniture and cars, which saw sales flag by 4.6%, 2.5% and 1.2% respectively, the U.S. Census Bureau reported. Sales slid after adjustments for seasonal activity as some stores engaged in aggressive discounts to clear inventory that piled up after overestimating post-pandemic demand, while inflation put pressure on consumers’ budgets, The Wall Street Journal reported.
“Consumers have shown incredible resolve in the face of higher inflation and rising borrowing costs in 2022, but there are hints that may be changing,” said Wells Fargo economist Sam Bullard in a client note, according to the WSJ. Bullard noted that the Federal Reserve’s aggressively paced interest rate hikes were having an adverse effect on furniture and car sales, which are particularly impacted by elevated borrowing costs.
On an annualized basis, total retail sales were up 9.2% in 2022, while total retail sales for the period between October 2022 and December 2022 were up 6.7%, according to the Census Bureau. Consumer prices ended the year up 6.5%, with core prices — which discount food and energy — up 5.7%, according to the Bureau of Labor Statistics’ Consumer Price Index.
Inflation can both boost and hinder retail sales, as higher prices prompt consumers to spend more on necessities while cutting back on discretionary spending, the WSJ reported.
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