Retail sales slumped 0.9% to start the new year, the steepest monthly decline since March 2023, as consumers pulled back after a strong holiday season, according to the latest data from the Census Bureau.
- The drop follows a 0.7% rise in December, signaling that higher prices and economic uncertainty may finally be weighing on spending.
Year-Over-Year. Despite the decline, sales were still 4.2% higher than a year ago, down slightly from December’s 4.4% but still one of the strongest year-over-year increases in the past 12 months.
Breaking It Down. Most sectors struggled to start the year. Sporting goods stores took the biggest hit, with sales plunging 4.6% in January alone. Car dealerships followed, down 2.8%, while online retailers, furniture stores, and home improvement stores also posted declines.
- On the flip side, gas stations and restaurants saw sales rise 0.9%, while general merchandise stores eked out a 0.5% gain.
Making Adjustments. Adjusted for inflation (3.0%), year-over-year sales are still growing 1.2% in real terms. But on a monthly basis, after accounting for inflation (0.5%), the real drop was 1.4%—making January a rough start to the year for retailers.
Rates. The dissapointing sales erased the jump seen on Wednesday with inflation coming in hotter than expected with the 10-year closing out Friday actually down one basis for the week at 4.47%
Bottom Line: January was a bad month for sales but it saved mortgage rates from continuing the upward trend.
