Consumers cut back on retail spending in January as factors like inflation and high credit card debt weighed on Americans, according to a report from the Department of Commerce.
U.S. retail sales were $700.3 billion in January, a decline of 0.8% from December adjusted for seasonal fluctuations, but were up 0.6% from January 2023 without taking price changes into account, according to a report from the Department of Commerce’s Census Bureau. Prices increased 3.1% year-over-year in January due to inflation, placing downward pressure on Americans’ spending power. (RELATED: Inflation Missed Expectations In January. Are We Just Stuck With High Inflation Forever?)
Retail sales in December were $706.2 billion, up by 0.4% from November, not accounting for inflation, according to the Census Bureau. Sales for building materials and garden supplies declined the most in January, down 4.1% in the month, followed by sales at motor vehicle and parts retailers, which declined 1.7% in the same time frame.
ICYMI! US retail sales fell 0.8% in January, marking the biggest decline since March last year. pic.twitter.com/0dQ6T58y2D
— jeroen blokland (@jsblokland) February 15, 2024
Consumers are increasingly turning to credit cards to fund their purchases, with Americans adding $50 billion in new credit card debt in the fourth quarter of 2023, bringing the cumulative total to a new all-time high of $1.129 trillion. Overall household debt increased by $212 billion in the fourth quarter, totaling $17.5 trillion.
Americans are also feeling pressure from high interest rates due to hikes from the Federal Reserve in the federal funds rate, which has been set to a range of 5.25% and 5.50%, the highest rate in 23 years. Rates were placed at such a high level to combat high inflation, which has resulted in an overall price increase of 18% since Biden first took office in January 2021.
The pullback in retail sales threatens to dampen economic growth, as consumer spending generally accounts for around 70% of gross domestic product (GDP) gains. GDP grew 3.3% in the fourth quarter of 2023 and 4.9% in the third quarter, above the common growth rate of around 2%.
The White House did not immediately respond to a request to comment from the Daily Caller News Foundation.
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