Retail sales tumble much more than expected in January
Retail sales fall sharply in January to lowest level in nearly a year
Inflation rises faster than expected in January, up 18% since Biden took office
Former Assistant Treasury Secretary Monica Crowley discusses the strain inflation is having on the middle and lower class on 'The Bottom Line.'
Americans pumped the brakes on spending in January after a pivotal holiday season as they continued to confront high interest rates and steeper prices for everyday goods.
Retail sales, a measure of how much consumers spent on a number of everyday goods including cars, food and gasoline, tumbled 0.8% in January, the Commerce Department said Thursday. That is lower than both the 0.1% decline projected by Refinitiv economists and the revised 0.4% increase recorded in December.
It marks the worst month for retail sales since March 2023.
Excluding the more volatile measurements of gasoline and autos, sales fell 0.5% last month.
SURGING AUTO INSURANCE PRICES ARE FUELING HIGHER INFLATION
Shoppers are seen in Atlanta on Feb. 14, 2023. (Dustin Chambers/Bloomberg via Getty Images / Getty Images)
The January advance is not adjusted for inflation, meaning that consumers may be spending the same but getting less bang for their buck.
Spending declined mostly across the board, with notable drops in sales at building materials and garden stores, miscellaneous stores, motor vehicle parts and retailers, as well as gas stations, as prices at the pump fell during the month. Americans also pulled back their spending on online shopping, with spending at non-store retailers sliding 0.8% from the previous month.
HIGH INFLATION IS STILL SQUEEZING AMERICANS' BUDGETS
Sales fell in nine of 13 retail categories last month.
However, Americans continued to spend at bars and restaurants in January, despite the winter chill across large swaths of the country that kept many individuals at home.
A pedestrian carries shopping bags in San Francisco on Dec. 21, 2022. (David Paul Morris/Bloomberg via Getty Images / Getty Images)
A solid job market and big wage increases have helped to buoy consumer spending in recent months, despite high inflation. However, many economists have been predicting that consumers will grow more cautious as student loan payments resume and high interest rates continue to work their way through the economy.
"From this report, we see that consumers are likely becoming more price conscious and perhaps, this is the first sign that the spending splurge is nearing the end," said Jeffrey Roach, chief economist at LPL Financial.
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On top of that, more Americans are relying on their credit cards to cover necessities.
Credit card debt surged to a new record at the end of 2023, while delinquencies are also on the rise.
"We have expected consumers to reign in their spending this year after drawing down the pandemic-related savings, driving the savings rate well below its pre-pandemic levels, and increasing their reliance on credit," said Kathy Bostjancic, Nationwide chief economist.