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Retail Federation Says Consumers Kept Spending in December

couple shopping

American retailers had a happy holiday, according to new National Retail Federation (NRF) data.

Retail sales — excluding automobiles and gasoline — rose 0.44% seasonally adjusted month over month and up 3.07% unadjusted year over year in December, according to the federation’s Retail Monitor figures released Wednesday (Jan. 10). Those numbers follow a November in which sales rose 0.77% month over month and 4.24% year over year.

“December’s numbers combined with November’s results show retailers had a very successful two-month holiday season,” NRF President and CEO Matthew Shay said. “Clearly, retailers got it right this holiday season, providing consumers with what they wanted, options on when and where to make their purchases and with prices customers were comfortable paying.”

How comfortable consumers feel now that 2024 has replaced 2023 is still to be determined, but recent reporting and research here shows signs of strain.

For example, older consumers enjoyed continued strong purchasing power in 2023, chiefly due to an 8.7% increase in Social Security benefits that exceeded inflation.

“This was the highest increase in four decades, and it allowed seniors to maintain their standard of living despite the high prices persistently impacting consumers,” PYMNTS wrote Tuesday (Jan. 9). “Seniors were able to spend on nonessential items like travel or restaurants and sustain savings.”

But retirement benefits are scheduled to rise by just 3.2% this year, which means consumers could be spending less, particularly when it comes to nonessential purchases.

Whole older Americans enjoy financially healthy lifestyles, a reduced increase in Social Security benefits and the consistently high prices for things like housing, healthcare, medical equipment and pharmacy items could change things.

“Should these factors lead baby boomers and seniors to dip into their savings to sustain their standard of living, less nonessential spending is likely to follow,” the report said.

Meanwhile, recent Federal Reserve data suggests that consumers relied heavily on credit cards for holiday shopping, at least in November. Those numbers showed that revolving credit, which includes credit card debt, jumped in November at an annualized pace of 17.7%, the fastest increase in months.

“If 60% of the economy lives paycheck to paycheck, as we’ve estimated, and a significant percentage of consumers tapped credit to finance their gifting, that means that 1) they’ve taken on even more debt that has been seen with the Fed’s November report and 2) they’re likely to feel a squeeze,” PYMNTS wrote earlier this week.

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