Retail sales cooled in January after strong December

U.S. retail sales fell more than expected in January amid cold weather and after robust holiday shopping in December.

Core retail sales (excluding automobile dealers, gasoline stations and restaurants) were down 0.8% from December, but up 2.8% year over year, based on data released by the U.S. Census Bureau.   

Overall retail sales in January were down 0.8% from December, but up 0.6% year over year. Economists had expected a 0.2% decrease in January spending, according to Bloomberg data. The month-over-month decline in January was the largest since March 2023.

The biggest decline was at building materials and garden stores, where sales fell 4.1%, followed by a 3% decline at miscellaneous store retailers. Gas station sales  declined 1.7%. Online sales edged down 0.8% 

On the up side, restaurants and bars reported an increase of 0.7%.

“Retail sales softened in January compared with the holiday season, but consumers were still engaged,” said Jack Kleinhenz, chief economist, National Retail Federation. “Extreme weather likely disrupted product demand and consumption patterns. January prices for goods came down, which affects sales figures even if the same number of items are sold, and increased prices for services pulled dollars away from retail purchases."

In commentary, David Silverman, senior director, Fitch Ratings, said that weakening January sales support Fitch’s view that discretionary goods volumes will likely be down in 2024, the result of “challenging multi-year comparisons since the onset of the pandemic and rising consumer headwinds, including reduced savings, rising rates and the compound impact of high inflation.”

“Fitch would expect most retailers to approach 2024 with a philosophy of lean inventory and expense planning and operational agility given expected sales volatility throughout the year,” Silverman said.

The Census Bureau numbers are in line with the CNBC/NRF Retail monitor which reported Monday that January sales nearly matched December’s levels. The Retail Monitor found core January retail sales were down 0.04% seasonally adjusted from October and up 3.24% unadjusted year over year. That compared with increases of 0.19% month over month and 2.4% year over year in December.