American Retail Spending Is Down for the First Time in 5 Months

Americans kept their pocketbooks closed last month.

Retail sales dropped 0.9 percent in January from the prior month, the first time spending was down since August, CNN reported on Friday. That’s a pretty significant decrease from December, when sales rose 0.7 percent, and quite different from economists’ estimates of a 0.4 percent decline.

“We will need to wait until the February data to see if this is the start of a more cautious consumer trend or indeed whether it was simply a weather-related pull back and we get a subsequent big gain,” James Knightley, the chief international economist at ING, said in a statement.

The sectors hit the most in January were specialty stores and car dealers, CNN noted. The former saw sales fall 4.6 percent, while the latter saw a decrease of 3 percent. Not all categories saw negative growth, though: Spending at department stores, restaurants, and bars remained positive.

The downward trend is being largely attributed to two factors: inflation and the weather. While inflation is lower than it was in the summer of 2022, CNN wrote, it’s been stuck at an elevated level in recent months. The President Donald Trump’s potential tariffs that he has been weighing against Canada and Mexico could have an effect on those numbers.

On the weather front, cold winter weather in the past few years has led people to cut back on spending, CNN noted, especially in January. And the widespread wildfires in Los Angeles last month could have led consumers there to cut back even further. Still, some economists are not worried about what last month’s data mean for the overall economic picture.

“The drop was dramatic, but several mitigating factors show there’s no cause for alarm,” Robert Frick, a corporate economist at Navy Federal Credit Union, said in an analyst note cited by CNN. “Some of it can be chalked up to bad weather, and some to auto sales tanking in January after an unusual surge in December due to fat dealer incentives. Especially considering December was revised up strongly, the rolling average of consumer spending remains solid.”

And while the luxury market has been struggling mightily in recent years, there are signs pointing to potential growth this year, as we previously reported. Maybe Americans will start opening up their wallets once again, then.