Department Stores Lead 1.1% Drop in December Retail Sales

Dept. Stores Lead Drop in December Retail Sales

U.S. retail sales fell for a second month in December as slumping department store receipts saw the key economic benchmark post its weakest tally in a year.

Officially, the Census Bureau report released Wednesday (Jan. 18) showed a 1.1% decline from the previous month, which followed a downwardly revised 1% dip in November from the 0.6% drop originally reported.

Among the key movers in the latest tally that represents the retail industry’s most important month of the year was a 6.6% monthly decline in department store sales, as well as a 2.5% retreat in furniture and home furnishing.

“The continued uncertainty around the macroeconomic environment has proven to be more difficult for retailers to weather as many consumers are more hesitant to spend in comparison to 2021 holiday spending,” Mike Rittler, head of Retail Card Services at TD Bank, told PYMNTS, calling the results unfortunate and below economists’ expectations.

Deeper Dive

The weakness in consumer spending and retail sales, which account for roughly 75% of U.S. economic activity, sent an immediate message to the Federal Reserve, as investors hoped the weak data would hasten an end to the recent string of interest rate increases.

Aside from the 4.6% drop in sales at gas stations, the latest data also showed continued softness in non-store retailers (eCommerce), electronics and appliances, and miscellaneous retailers, such as pet stores and florists, all of which fell 1.1% in December.

On the flip side, the 0.3% gain by the building materials segment bested all 15 other categories surveyed, followed by tiny 0.1% increases in grocery stores and sporting goods, hobby, musical instrument and book stores.

On an annualized basis, the new government data showed December sales rose 6% from a year ago, while the full year 2022 retail sales figure delivered a 9.2% gain versus 2021.

“With that sentiment in mind, it is important for retailers to continue to take the lessons that we learned from the pandemic to heart going into the spring season,” Rittler noted. “It is now more important than ever to prioritize the customer service experience in line with supply chain management.”

It is important to note that the retail sales figures are not adjusted for inflation, which at last check was running at 6.5% after falling for six consecutive months. Even when the volatility of gasoline and car sales are backed out, the latest core retail sales were down 1.2% on a monthly basis, but up 5.2% from a year ago.

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