The questions swirling amid the January sales slump boils down to these:
Is it the pause that refreshes — as consumers essentially take a breath, shore up their finances a bit, and then keep spending?
Or is the prime mover of the U.S. economy (that’s the consumer, of course) finally exhausted?
January’s 0.8% slide in retail sales, as announced Thursday (Feb. 15) by the U.S. Census Bureau, was worse than estimates, where consensus had looked for a 0.3% decline from December’s levels. The rise in December, over November’s levels, had been 0.4%.
The slide, though not universal among categories, was widespread. Nine of 13 categories tracked were lower in January.
The sole gainers were furniture and home furniture stores, up 1.5% in the month; food and beverage stores, up 0.1% (including groceries, which were up 0.6%); and department stores, which eked out a 0.5% gain. Restaurants showed a 0.7% gain.
The most marked declines came miscellaneous store retailers, sliding 3%; gas stations, also down 1.7% and health and beauty spending, which gave up 1.1%. Notably, non-store retailers, a category that serves as a proxy for online retailers, were down 0.8%.
The read across is that consumers continued to dine out, continued to put food on the table — but pulled back most everywhere else. December, of course, was the peak of holiday shopping and celebrations.
PYMNTS Intelligence data showed at the end of year that the majority of budget-conscious consumers — which would be a significant slice of households, given the paycheck-to-paycheck status of about 60% of us here in the U.S— used traditional credit and buy now, pay later (BNPL) plans to finance holiday spending.
And, as reported here, per separate data from the Federal Reserve, the central bank noted that that on an annualized basis, about 8.5% of credit card balances and 7.7% of auto loans have transitioned into delinquency status. “Serious credit card delinquencies increased across all age groups, with younger borrowers surpassing pre-pandemic levels,” read the release accompanying that data.
As for the percentage of loans that have flowed into serious delinquency status, 6.4% of credit card data had earned that designation, at more than 90 days delinquent, up from 4% a year ago.
The delinquencies are skewed toward younger borrowers, which we note may be an ominous sign for retailers and merchants and restaurants that are dependent on continued spending from these cohorts. The data compiled by the Fed show that 9.6% of card debt held by borrowers between 18 and 29 years of age were past due by 90 days or more, up from 7.6% last year.
For borrowers 30 to 39 years old, the respective 90-plus-day delinquency rates were a respective 8.7% at the fourth quarter of last year and 5.7% a year ago.
In the meantime, the latest inflation data show that food and shelter were more expensive in January, and in many cases, the pace of increase had accelerated. Since the consumers surveyed by PYMNTS in the latest paycheck-to-paycheck report show some concerns on the macro front — 83% of consumers said that they had at least some concerns about current and near-term economic conditions and 40% of consumers expect interest rates on loans to increase this year — January’s pullback should be no surprise, though the magnitude was.
And the question remains as to how long it all will last.
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