May 26, 2024

US Retail Sales Jumped in December, Capping Off Strong 2023 Holiday Shopping Season

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Jan 17, 2024


US retail sales rose more than expected in December 2023, likely boosted by strong holiday shopping and resilient consumer demand despite high inflation and interest rates. The strong finish caps off an overall solid holiday season for retailers.

The Commerce Department reported that retail sales rose 0.6% in December after falling 0.2% in November. The increase beat economists’ expectations for a 0.4% rise. Several key categories saw gains, including online sales, electronics, appliances, clothing, sporting goods, and bars & restaurants.

Excluding volatile categories like autos and gas, core retail sales climbed 0.7% in December, outpacing estimates. The core reading provides a better sense of underlying consumer demand.

“The strong December retail sales data is evidence that the US consumer remained resilient heading into 2024 despite the various economic headwinds,” said Rick Smith, senior economist at Wells Fargo.

The upbeat report suggests the economy maintained momentum at the end of 2023 after growing at a healthy clip in the third quarter. It’s a sign consumers still have money to spend even as inflation eats into their paychecks.

December Sales Details

Most major retail categories showed solid growth in December:

  • Online sales jumped 1.3%
  • Electronics & appliance stores rose 1.1%
  • Clothing gained 1.3%
  • Sporting goods & hobby stores increased 1.7%
  • General merchandise sales rose 1.1%
  • Food services & drinking places (bars & restaurants) climbed 1.7%

Core retail sales, which filter out autos, gas and building materials, posted the best gain since March. The core measure corresponds most closely with consumer spending component of GDP.

The strong report validates forecasts from Mastercard SpendingPulse and National Retail Federation, which predicted holiday retail sales would grow over 7% despite the strained economy.

“Consumers were remarkably resilient during the holiday season, buoyed by a strong job market,” said Jack Kleinhenz, chief economist for the NRF. “The December retail numbers show the willingness to spend and provide momentum going into 2024.”

The upbeat finish to 2023 is a positive signal about consumers’ mindset and could support future spending even as the Federal Reserve continues to lift interest rates to tame inflation.

“The consumers showed they are willing and able to continue spending even in a high inflationary environment,” said Jeffrey Roach, chief economist at LPL Financial.

December Auto Sales Struggle

While most categories thrived in December, auto sales have been a weak spot amid shortages and high prices.

Retail sales at motor vehicle & parts dealers fell 1.1% in December after sliding 1.3% in November. For all of 2022, auto sales dropped about 8% from the prior year, the worst annual drop since 2008.

Ongoing shortages of computer chips and other auto parts have crimped vehicle production. And rising interest rates have made auto loans more expensive.

Dealers and analysts expect new-vehicle prices to be higher again in 2023 as automakers deal with inflation and supply constraints. Many buyers have been priced out of the new-car market.

Used vehicle prices are already dropping from astronomical highs reached during the pandemic. But the average used vehicle still costs around $28,000.

Gasoline Sales Decline on Lower Prices

Retail sales at gas stations decreased 2.3% in December. That’s not surprising given the sharp drop in gas prices in recent months.

The average price for a gallon of gas has plunged to $3.27 nationwide, according to AAA, down from $3.79 a month ago and a record $5 a gallon in mid-2022. Gasoline spending typically moves lower when prices at the pump decline.

While demand for gas remains strong, Americans are getting relief after months of high fuel costs ate into household budgets. Lower gas prices may encourage consumers to spend more in areas like travel and dining out.

Building Materials Retailers See Drop

Sales at building material and garden supply stores fell 1.3% in December. This category has cooled after a pandemic boom fueled by home buyers.

Mortgage rates above 6% have crushed the housing market. With affordability worsening, fewer Americans are buying homes or investing in remodeling projects.

Some home-improvement chains have noted weakening demand in recent months. Retail giants Home Depot and Lowe’s said cold and wet weather also hampered sales in parts impacted by storms.

December Retail Sales Boost 2023 Holiday Season

Despite various headwinds, retailers benefited from resilient consumer spending over the crucial 2022 holiday period spanning November-December.

Mastercard SpendingPulse reported overall retail sales climbed 7.6% from November 1 through December 24 compared to the year-ago period. That beat the firm’s initial forecast for a 7.1% increase.

E-commerce was a standout, with online sales jumping 11% year-over-year amid deep discounts. Department store sales grew 6.6% while clothing stores were up 2.4%.

“Our data shows consumers were willing to spend through the uncertainty of inflationary pressures,” said Steve Sadove of Mastercard SpendingPulse.

The National Retail Federation also said its member survey found holiday sales increased a better-than-expected 7.3% from 2021. Heavy promotions helped drive spending.

“Consumers shopped early and hunted for deals throughout the season,” said BFMC retail analyst Brian Field. “Retailers made effective use of targeted offers and personalized promotions to attract customer dollars.”

All told, November-December holiday sales rose solidly from last year and exceeded forecasts even as shoppers contended with the highest inflation in 40 years.

Outlook for Consumer Spending in 2024

The strong holiday shopping season and December retail sales growth bode well for consumer spending in the first part of 2024. But economists caution the outlook faces risks from high inflation and interest rates.

“The report paints a picture of a still resilient American consumer despite the slowing economy,” said economist Lydia Boussour of Oxford Economics.

Recent declines in prices for goods like food, apparel and gasoline should ease some pressure on household budgets in the coming months. Gasoline price relief in particular may give consumers more room to spend in areas like travel and leisure.

However, the Fed is likely to continue raising interest rates, keeping borrowing costs elevated. That could squeeze households with significant credit card debt or auto loans.

“The Fed’s battle with inflation is far from over,” noted Wells Fargo’s Rick Smith. “Additional rate hikes in early 2024 will slow demand across interest-sensitive sectors of the economy.”

High rates may also discourage business investment and hiring over time. A potential recession by mid-2024 would severely crimp consumer spending and dampen retail sales growth.

For now, resilient household balance sheets support ongoing retail demand. But consumers still face an uncertain environment this year. Moderating inflation expectations provide some reason for optimism, though spending may cool in the latter half of 2024.

Key Takeaways:

  • US retail sales rebounded 0.6% in December, beating forecasts
  • Increase caps off generally solid 2022 holiday shopping period
  • Most categories saw gains, showing resilient consumer demand
  • Auto and gas sales fell, while online retail jumped
  • Data suggests economy maintained momentum despite headwinds
  • Outlook complicated by inflation and interest rate uncertainty



AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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