Retail sales fell more than expected in December, suggesting that inflation took a toll on consumers’ wallets during the busiest shopping season of the year.
Total U.S. retail sales were $677.1 billion in December, according to a monthly report from the U.S. Census Bureau. This total was down 1.1% from November but up 6% from the same month in 2021. Data for November was revised to show sales dropping 1% instead of 0.6% as previously reported. It was the second straight monthly decline.
What’s more, the report noted that total sales for the 12 months of 2022 were up 9.2% from 2021, while total sales for the October 2022 through December 2022 period were up 6.7% from the same period a year ago.
Growth in core retail categories was much more muted in December. This can be seen in sales at clothing retailers – normally a holiday favorite – which only increased 2.9% year-over-year in December. Sales at department stores fell 0.6% last month, and electronics and appliance stores were down 5.6%.
According to Ted Rossman, senior industry analyst at Bankrate, December’s numbers point to holiday sales lagged the National Retail Federation’s (NRF) projection of a 6% to 8% increase over last year. “The growth that occurred was probably driven much more by higher prices than an increase in units sold,” Rossman said.
Separately on Wednesday, the NRF confirmed its holiday sales numbers. Retail sales during 2022’s November-December holiday season grew 5.3% over 2021 to $936.3 billion, falling short of its forecast amid continuing inflation and high interest rates.
But, while holiday growth was less than expected, sales for the year grew 7% over 2021 to $4.9 trillion, meeting NRF’s forecast of between 6% and 8% growth for the year.
“The last two years of retail sales have been unprecedented, and no one ever thought it was sustainable,” NRF president and CEO Matthew Shay said in a statement. “Nonetheless, we closed out 2022 with impressive annual retail sales and a respectable holiday season despite historic levels of inflation and interest rate hikes to cool the economy.”
These numbers come as inflation continues to show signs of cooling. Consumer prices rose by 6.5% in December compared to last year, according to a report from the U.S. Bureau of Labor Statistics. This marks the smallest 12-month increase since the period ending in October 2021 and a slowdown from November’s 7.1% and October’s 7.7% year over year growth. Compared to November 2022, prices in December were down 0.1%.
Despite the month-over-month drop, prices are still significantly up compared to last year. Compared to 2020, prices are up 13.9%.
“The next few months are traditionally the slowest months for retailers,” Rossman added. “With more Americans battling expensive credit card debt and inflation remaining stubbornly high, a further slowdown in purchasing appears likely, at least in the near term.”