Flat Retail Sales in December

December retail sales were flat, indicating a slowdown during the holiday shopping season. This follows a 0.6% increase in November 2025.

Economists surveyed by Dow Jones had expected a 0.4% increase for December, making the actual outcome disappointing.

Annual Sales and Inflation

On an annual basis, retail sales rose by 2.4% in December, but this was below the inflation rate of 2.7%, as reported by the consumer price index.

This means that while sales were up compared to last year, they did not keep pace with rising prices.

Sales Excluding Autos and Control Group Data

Sales excluding autos remained unchanged in December, despite expectations for a 0.3% increase. Additionally, a measure known as the "control group," which excludes certain items and is crucial for GDP calculations, showed a 0.1% drop for the month.

This decline suggests weaker consumer spending trends.

Retail Categories Performance

Different categories of retail saw varied performance in December. Miscellaneous retailers and furniture stores saw declines of 0.9%, while clothing and accessories stores were down 0.7%. Electronics and appliances also experienced a drop, lowering by 0.4%.

However, building materials and garden centers reported a 1.2% increase, highlighting some areas of growth.

Economic Context and Consumer Behavior

The retail sales data reflects a K-shaped economy, where higher-income consumers are spending more while middle- and lower-income consumers are more cautious.

Heather Long, chief economist at Navy Federal Credit Union, noted that retail sales were flat due to lower spending on items like autos, home furnishings, and clothing, which were negatively impacted by tariffs in 2025.

Further Economic Indicators

Despite the disappointing retail sales, fourth-quarter economic activity showed strength.

The Atlanta Federal Reserve's data tracker indicated a GDP growth rate of 4.2% annualized. However, this figure may be adjusted downwards following the retail sales report.

Employment Costs and Other Economic News

In related economic news, the employment cost index rose by 0.7% in the fourth quarter of 2025, which was below the forecasted increase of 0.8%.

Over the year, total compensation costs rose by 3.4%, slightly above the inflation rate. Additionally, import prices rose by 0.1% in December, while export prices increased by 0.3%.

What’s Next for Investors?

The retail sales data is crucial as it comes just before the release of the nonfarm payrolls count for January, which is expected to show an increase of about 55,000 jobs.

This could impact market expectations and investor sentiment as they assess consumer spending trends and overall economic health.