ALEXANDRIA, Va.—Retail sales were down a seasonally adjusted 1.1% in December, the sharpest decrease last year, reports the Wall Street Journal. Retail sales have slipped three of the past four months, the Commerce Department said.
The National Retail Federation (NRF) reported that holiday sales were disappointing. Retail sales during 2022’s November-December holiday season grew 5.3% over 2021 to $936.3 billion, falling short of NRF’s forecast amid continuing inflation and high interest rates.
“We knew it could be touch-and-go for final holiday sales given early shopping in October that likely pulled some sales forward plus price pressures and cold, stormy weather,” NRF Chief Economist Jack Kleinhenz said in a statement.
Consumers are “hit with higher food prices, they are getting hit with higher service prices and they are having to make choices,” Kleinhenz told the Journal.
The Commerce Department’s retail sales report showed grocery, sporting goods and home improvement stores were the only categories to see increased sales in December. Spending declined in multiple gift-giving categories, including online retailers (which includes companies such as Amazon), electronics, clothing and department stores. Dining out at bars and restaurants also slipped by 0.9% last month, and vehicle and furniture sales fell sharply.
Additionally, economic activity was relatively flat at the beginning of this year, according to a separate report by the Federal Reserve. Half of the Fed’s 12 regional banks reported no change or slight declines in economic activity in their districts. Some retailers “noted that high inflation continued to reduce consumers’ purchasing power, particularly among low- and moderate-income households,” according to the Fed.
Last week, the Labor Department reported that inflation fell to 6.5% in December, down from its peak of 9.1% in June, but it’s still well above the Federal Reserve’s target of 2%.
The Journal reports that these signs and others, including hiring and wage growth declines and existing home sale decreases, point to a slowing U.S. economy, as the Fed raises interest rates to offset inflation. The Fed raised interest rates seven times in 2022, totaling 4.25 percentage points, and the Fed has made it known that they will continue to raise rates in 2023.
Economists surveyed by The Wall Street Journal this month expect higher interest rates to tip the U.S. economy into a recession in the coming year.
“The lag impact of elevated inflation weighs heavily on U.S. households, it’s very clear that the median American consumer is still reeling from the loss of wages in inflation-adjusted terms,” Joseph Brusuelas, chief economist at RSM US LLP, told the Journal. “We’re moving towards what I would expect to be a mild recession in 2023.”
A survey by the Conference Board Top company showed CEOs are prepping for a global recession, albeit a mild and short one, and they expect growth to return by late 2023 or the first half of 2024.
“Just about every region with the exception of China believes there’s going to be some kind of economic downturn,” Dana Peterson, the Conference Board’s chief economist, told the Journal. “Ninety-eight percent of CEOs in the U.S. think there is going to be a recession—but it’s going to be short and shallow.”