US Retail Sales Rise 0.4% Amid Holiday Shopping/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ US retail sales increased by 0.4% in December, driven by strong holiday shopping despite inflation and elevated interest rates. Spending on cars, furniture, and sporting goods boosted growth, supported by low unemployment and rising wages. Retailers remain optimistic for 2025 as promotions and consumer spending trends evolve.
December Retail Growth: Quick Looks
- Retail Sales Increase: December retail sales rose 0.4% from November.
- Holiday Spending: Car sales up 0.7%, furniture sales up 2.3%.
- Inflation Impact: Prices rose 2.7%, while goods prices remained steady.
- Economic Growth: Economists expect a 2.9% annual growth rate for Q4.
- Consumer Dynamics: Higher-income shoppers drive spending; lower-income families feel inflation’s pinch.
- Retail Trends: Promotions, sourcing strategies, and AI dominate 2025 retail focus.
Deep Look
Retail sales in the United States rose by a modest 0.4% in December, driven by strong holiday shopping and consumer resilience, according to a report from the Commerce Department on Thursday. Despite economic challenges such as elevated inflation and high interest rates, low unemployment and rising wages have enabled consumers to sustain spending, bolstering economic growth.
While December’s growth was a step down from November’s revised 0.8% increase, the data underscores the strength of American consumers. Paul Ashworth, Chief North American Economist at Capital Economics, noted that the report was “strong,” even with declines in certain categories like building materials and restaurants.
Holiday Spending Fuels Growth
Much of the increase was fueled by higher spending on big-ticket items and holiday goods. Car sales jumped 0.7%, while furniture purchases rose by 2.3%. Sporting goods stores saw a significant 2.6% increase, and clothing retailers reported a 1.5% uptick. Retail sales climbed 3.9% year-over-year in December, while prices for goods remained relatively stable, rising just 0.3%.
Economists now estimate that the economy grew at an annualized rate of 2.9% in the fourth quarter of 2024, a slight upward revision from previous forecasts.
Inflation and Consumer Dynamics
Inflation, while still a factor, has moderated compared to earlier peaks. The Labor Department reported that core inflation (excluding food and energy) rose at a slower pace in December. Apartment rental costs and clothing prices saw minimal increases, offering hope that the Federal Reserve might cut interest rates further in 2025.
However, inflation continues to create a divide among consumers. Higher-income households, buoyed by rising home values and stock market gains, have continued spending on remodeling and discretionary purchases. In contrast, lower-income families remain more cautious, strained by the high-price environment.
Greg Daco, Chief Economist at EY-Parthenon, highlighted this disparity, stating, “Families at the higher end of the income spectrum are doing more than their fair share of consumer spending… Families at the lower end are more constrained.”
Retailers’ Strategic Focus
Retailers, meanwhile, are strategizing for a challenging yet promising 2025. Promotions, which played a significant role during the holiday season, are expected to continue. For example, Whole Foods Market revealed plans to expand its discount offerings, aiming to attract price-conscious shoppers.
“I want every single customer who walks in our door to find something that works within their budget,” said Sonya Gafsi Oblisk, Chief Merchandising and Marketing Officer at Whole Foods.
Additionally, the retail industry is preparing for potential new tariffs under the Trump administration. Companies like Walmart and Macy’s are exploring ways to diversify sourcing and mitigate cost increases. Tony Spring, CEO of Macy’s Inc., noted that the company has navigated tariff challenges before but emphasized the need for fair global trade relationships.
Looking Ahead
The retail industry remains optimistic about 2025, buoyed by consumer demand and innovative strategies. The National Retail Federation’s annual conference in New York highlighted key trends, including shopper caution, artificial intelligence, and the ongoing impact of inflation.
As retailers adapt to evolving economic conditions and consumer behaviors, the solid holiday season offers a promising foundation for growth in the months ahead.