US retail sales slumped in December, dragged by sales at department stores and gasoline stations
Washington (AFP) - US retail sales slumped for a second straight month in December while wholesale prices fell, said government data released Wednesday, as consumers grow cautious on economic uncertainty.
The US central bank has been raising interest rates steeply to cool the world’s biggest economy as American households found themselves squeezed by decades-high inflation – and the effects are now rippling across sectors.
Retail sales contracted more than expected by 1.1 percent in December from a month prior, to $677.1 billion, said the latest Commerce Department figures. This was down from a revised one percent drop in November.
Falling sales at department stores and gasoline stations proved to be a drag, while the auto and furniture segments also saw declines.
Gas prices plunged last month, and analysts said bad weather across the country could have temporarily held back vehicle sales as well.
But retail sales remains 6.0 percent up from December 2021. For all of last year, total sales still jumped 9.2 percent, the Commerce Department said.
Spending at restaurants and bars took a hit as well, dropping 0.9 percent between November and December, despite consumer resilience previously.
- Growth engine hit -
In a separate report, the Labor Department said US producer prices fell 0.5 percent in December from November, the biggest drop since early in the pandemic.
This signals further easing in inflationary pressures, as gauges for goods and energy costs both fell.
“Weaker consumer spending momentum at the end of 2022 is a sign the economy’s main growth engine is beginning to sputter,” said Oren Klachkin of Oxford Economics.
He added that the Federal Reserve is “unlikely to unwind its recent monetary policy tightening any time soon,” stressing that the central bank is comfortable with allowing a recession if consumer inflation returns to its two percent target.
Ian Shepherdson of Pantheon Macroeconomics said the steep drop in December retail sales continues a downward trend since last spring.
While food service sales “outperformed” for much of last year, partly due to a shift in consumption towards services and away from goods, the segment is now struggling, he added.
This comes as “consumers start to reduce discretionary spending in the face of an uncertain economic outlook and sharply higher borrowing costs,” Shepherdson said.