WASHINGTON — Americans cut back sharply on retail spending last month as the holiday shopping season began amid high prices and rising interest rates that are forcing some families, particularly lower income households, to cut back on what they buy.
Retail sales fell 0.6% from November to December after a sharp 1.3% rise the previous month, the government said Thursday. Sales fell at furniture, electronics, and home and garden stores.
Sales also fell at auto dealers, sporting goods stores, and at general merchandise stores, a category that includes large chains such as Walmart and Target.
Consumer spending has been resilient ever since inflation first spiked almost 18 months ago, but the capacity of Americans to continue spending in a period of high inflation may be beginning to ebb. Inflation has been coming down from the four-decade high it reached this summer but remains elevated, enough to erode the spending power of Americans. Prices rose 7.1% in November from a year ago.
Strong hiring, rising pay, and enhanced savings from government financial support during the pandemic have enabled many shoppers to keep up with rising prices. Yet many are now digging into their savings to maintain the same level of spending. The saving rate declined to its second-lowest level on record in October.
Americans are also putting more purchases on their credit cards. Total credit card debt jumped 15% in the July-September quarter, according to the Federal Reserve Bank of New York, the biggest jump in 20 years.
The low- to middle-income shopper is starting to show signs of stress. Craft supplies chain Jo-Ann Stores Inc. said Tuesday it is pausing its quarterly dividend after seeing its shopper pull back this fall. Sales at stores opened at least a year fell 8% in the quarter ended Oct. 22.
“It’s clear that consumers are increasingly pressured by inflation and are being more selective with their purchases in the current holiday season, prioritizing household essentials over many discretionary activities,” said Wade Miquelon, Jo-Ann’s president and CEO. “These budget-conscious consumers have been under a prolonged period of stress for many months now, and they are getting more selective with their purchases.”
However, the good news, Miquelon said, is that inflationary trends are subsiding even as the U.S. potentially heads into “something more typical of a recessionary environment in the short term.”