The latest U.S. retail sales data for December showed resilience despite facing challenges from high interest rates and inflationary pressures. Boosted by the holiday shopping season, most product categories maintained growth. However, the growth rate slightly missed market expectations, indicating that some consumers remained cautious amid the economic environment.
The retail sales increased by 3.8% year-over-year (previous: 4.1%) and 0.4% month-over-month (previous: 0.8%)in December, according U.S. Census Bureau on January 17, slightly below the market expectation of 0.6%.
Breaking down the details, 10 out of 13 major retail categories recorded growth. Automotive-related sales were particularly strong, growing 8.4% year-over-year (prior: 7.4%) and 0.7% month-over-month (prior: 3.1%). This reflects continued uncertainty over Trump’s tariff policies and concerns about the end of EV subsidies, keeping auto sales elevated.
Furniture sales also grew significantly, with an 8.4% year-over-year increase (prior: 2.8%) and a 2.3% month-over-month rise (prior: 1.3%), potentially reflecting demand for home rebuilding following hurricanes in October. Meanwhile, online sales continued to grow at a solid pace due to the delayed Cyber Monday this year, rising 6.0% year-over-year (prior: 9.8%) and 0.2% month-over-month (prior: 1.7%).
However, Food services & drinking places, which reflect household financial conditions, declined again, with a 2.4% year-over-year increase (prior: 3.1%) and a -0.3% month-over-month change (prior: 0.1%). Sales of building materials also fell, impacted by 30-year mortgage rates returning to 7%, with a -1.8% year-over-year decline (prior: 2.1%) and a -2.0% month-over-month decline (prior: -0.8%).
Excluding auto and gasoline sales, core retail sales grew 3.3% year-over-year (prior: 4.1%) and 0.3% month-over-month (prior: 0.2%). Further excluding food services and building materials, control group retail sales increased by 4.1% year-over-year (prior: 4.6%) and 0.7% month-over-month (prior: 0.4%).
Overall, most retail categories saw moderate growth in December. While elevated interest rates and price levels continued to pressure lower-income groups and housing-related sales, the U.S. holiday shopping season ended on a relatively strong note, reaffirming the resilience of U.S. consumer spending.
Separate Data on January 17 shows that latest jobless claims data slight increase in initial jobless claims to 217,000 (prior: 203,000), while the four-week moving average dropped to 212,750 (prior: 213,000), the lowest level since April of last year. Meanwhile, continuing claims fell to 1,859,000 (prior: 1,877,000).
Combined with December’s nonfarm payrolls far exceeding market expectations and the JOLTs layoff rate remaining at historic lows, the U.S. labor market remains robust. With a healthy labor market and resilient consumer spending, the Federal Reserve Bank of Atlanta estimates Q4 GDP to grow at an annualized rate of 3.0%, slightly lower by 0.1 percentage points compared to Q3.