Updated 4:07 p.m. E.T. Feb. 15
The reserve of spending strength that helped consumers hold on through the holiday season weakened last month.
Year-over-year retail and food service sales growth slowed to 0.6 percent in January — the worst showing in the Census Bureau’s monthly reading of spending since May 2020.
Compared with December, the seasonally adjusted growth rate fell by 0.8 percent, far weaker than the 0.2 percent decline economists projected, according to FactSet.
Investors took the retail sales results in stride, trading the Dow Jones Industrial Average up 0.9 percent, or 348.85 points, to 38,773.12, and experts cautioned against reading too much into one month’s results.
Some blamed the weather for the sales slowdown.
Department stores were hit particularly hard with a 6.7 percent decline from a year earlier while apparel and accessories specialty stores fared better with an increase of 0.4 percent.
But January also served as something of a warning and has retail watchers now looking for further signs of consumer weakness headed into the year.
“During their recent earnings calls, Visa and Mastercard blamed bad weather for disappointing January sales figures,” said Ted Rossman, senior industry analyst at Bankrate, in an analysis. “It’s also possible that consumers are hunkering down after a holiday debt hangover. Americans ran up record-high credit card balances during the fourth quarter, and with record-high credit card rates adding insult to injury, it’s practical to spend less — even if that’s not great news for our consumer-driven economy. More people are carrying more debt at higher rates for longer periods of time.”
Neil Saunders, managing director of GlobalData, also pointed to debt levels — with households adding $143.1 billion to their credit card balances in the fourth quarter — and called out the continuing impact of inflation.
“Essentially, the mini retail boom at the end of 2023 was built on shaky foundations that are not carrying forward into this new year,” Saunders said. “While we do not see reason for alarm, the warning signs of a modest slowdown are present. Many of the problems postponed at the back end of last year are now becoming more significant. This does not mean that 2024 will be a disaster, but it does signal a tougher and bumpier year than 2023.”
The good news is that measures of consumer confidence have been on the rise and are showing that — even if they pulled back on spending — shoppers are feeling pretty good about their finances.
