Retail Sales Decline In January As Americans’ Economic Woes Persist
Consumers cut back on retail spending in January as factors like inflation and high credit card debt weighed on Americans, according to a report from the Department of Commerce.
U.S. retail sales were $700.3 billion in January, a decline of 0.8% from December adjusted for seasonal fluctuations, but were up 0.6% from January 2023 without taking price changes into account, according to a report from the Department of Commerce’s Census Bureau. Prices increased 3.1% year-over-year in January due to inflation, placing downward pressure on Americans’ spending power.
Retail sales in December were $706.2 billion, up by 0.4% from November, not accounting for inflation, according to the Census Bureau. Sales for building materials and garden supplies declined the most in January, down 4.1% in the month, followed by sales at motor vehicle and parts retailers, which declined 1.7% in the same time frame.
“American consumers have been remarkably resilient,” a White House spokesperson told the Daily Caller News Foundation about the report. “We saw strong consumer spending every quarter last year — powered by a strong jobs market, rising wages, and falling inflation. As some analysts noted, today’s report reflects in part a pullback in spending after the holidays and cold weather in January. That said, we know consumers are becoming more price sensitive. That should put pressure on corporations to lower their margins and pass on savings to consumers — helping lower costs and inflation.”
Consumers are increasingly turning to credit cards to fund their purchases, with Americans adding $50 billion in new credit card debt in the fourth quarter of 2023, bringing the cumulative total to a new all-time high of $1.129 trillion. Overall household debt increased by $212 billion in the fourth quarter, totaling $17.5 trillion.
Americans are also feeling pressure from high interest rates due to hikes from the Federal Reserve in the federal funds rate, which has been set to a range of 5.25% and 5.50%, the highest rate in 23 years. Rates were placed at such a high level to combat high inflation, which has resulted in an overall price increase of 18% since Biden first took office in January 2021.
The pullback in retail sales threatens to dampen economic growth, as consumer spending generally accounts for around 70% of gross domestic product (GDP) gains. GDP grew 3.3% in the fourth quarter of 2023 and 4.9% in the third quarter, above the common growth rate of around 2%.
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