Consumers Pull Back to Protect Savings as Retail Sales Stall

Flat retail sales at year end ran counter to the growth momentum many analysts expected upon the release of the latest report on Tuesday (Feb. 10).

Instead, the data offered a clearer view into how consumers are navigating constrained budgets by choosing carefully where spending continues, and how those purchases are financed.

Advance estimates from the Census Bureau show that total U.S. retail and food services sales were essentially unchanged month over month at $735 billion, while still higher than a year earlier. The stability of the topline masked notable differences across categories and spending channels.

Flat Results Caught Many Observers Off Guard

The flat reading followed months of steady consumer activity that boosted sales. Expectations had leaned toward a stronger finish to the year, with consensus estimates calling for a gain of about 0.4%, month on month, particularly given wage growth earlier in the cycle and continued employment gains.

Gains in a limited number of categories offset declines elsewhere, leaving the aggregate number unchanged.

Building materials led monthly gains, with sales rising 1.2%, while sporting goods, hobby, musical instrument and book stores posted a 0.4% increase. Grocery store sales edged up 0.1%, and nonstore retailers also rose 0.1%, continuing to outperform on a year-over-year basis with annual growth of 5.3%.

Offsetting those gains, furniture and home furnishings fell 0.9% month over month, clothing and accessories declined 0.7%, electronics and appliance stores slipped 0.4%, and department store sales dropped 0.7%. Food services and drinking places dipped 0.1% for the month, despite finishing the year up 5.3%, underscoring how resilience in essentials and services was counterbalanced by pullbacks in discretionary goods.

PYMNTS Data Had Already Flagged a Shift

The retail report aligned closely with PYMNTS Intelligence findings that had been documenting growing pressure on household finances. The January 2026 PYMNTS Data Book, “ One Shock Away: The Fragile Math of the American Paycheck,” showed that unexpected expenses are no longer rare disruptions. More than half of consumers reported at least one unplanned expense of $400 or more in the prior year, and roughly 7 in 10 faced expenses exceeding $1,000 at some point.

These shocks strained liquidity even among households that remained employed and spending. Confidence in handling future disruptions was uneven, particularly among those living paycheck to paycheck, highlighting how thin the buffer has become for many families.

Rather than triggering a pullback in consumption, financial pressure has changed how spending is managed. Findings in the PYMNTS Intelligence February 2026 “Pay Later Ecosystem Report: Pay Later Moves Into the Monthly Budget” showed that installment plans and buy now, pay later (BNPL) are increasingly embedded in everyday budgeting. These tools are being used not only for discretionary purchases but also for essential and recurring expenses, including groceries and utilities.

Crucially, PYMNTS data indicate that the use of BNPL and installments often reflects constraint rather than distress. Usage rates among consumers living paycheck to paycheck were similar whether or not they struggled to pay bills. This suggests that consumers are using these options to align payments with income timing, rather than signaling a broad deterioration in financial health.  Even consumers who are current on bills face uncertainty around when income arrives, increasing the appeal of payment options that allow expenses to be spread out or delayed.

Recalibration, Not Retrenchment

Taken together, the data suggest that flat retail spending reflects recalibration rather than retrenchment. Consumers are continuing to participate in the economy while reshaping how purchases fit into constrained and unpredictable budgets. Credit cards, installments and BNPL plans are being used as tools to preserve liquidity and maintain flexibility, not simply to fuel excess. Flat retail spending, in this context, marks a transition in behavior.