Retail sales fell lower than expected during December 2022, thereby putting consumer spending and the U.S. economy on a weaker growth path leading into 2023. The 1.1% drop exceeded analysts’ forecasts of a 0.8% decline. Despite this fall, retail sales still grew 0.6% on a year-on-year basis.
This was the second consecutive month in which retail sales were on the decline. In November, sales declined by 1.0%, thus exceeding initial estimates of a 0.8% decline.
Receipts at service stations plunged 4.5% in December, while auto sales also found themselves at the forefront of December’s sales decline, falling 1.2%. Furniture store sales declined by 2.5%, while receipts at food services and drinking places dropped by 0.9%.
“Weak retail sales in December shows consumers are likely retrenching during a time of economic uncertainty,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina. According to Roach, this indicates a rise in recession risks for 2023.
Sales have largely been affected by higher borrowing costs; a result of the Federal Reserve’s tight monetary policy as it battles inflation. Last year, the Federal Reserve raised interest rates by near zero to the 4.25%-4.50% range; 425 basis points. This is the highest rate increase since 2007.