US retail sales unexpectedly flat in December

• Retail sales showed 0% growth in December following a 0.6% increase in November, defying economist expectations of 0.4% growth
• Core retail sales (excluding autos, gas, building materials, and food services) declined 0.1% in December, with November's gain revised down from 0.4% to 0.2%
• Consumer saving rate fell to a three-year low of 3.5% in November as shoppers maintained spending despite economic concerns about tariffs and a softening labor market

Summary: US Retail Sales Flat in December, Signaling Economic Slowdown

Key Findings:

U.S. retail sales remained unexpectedly flat in December 2023, missing economist forecasts of a 0.4% increase. This followed an unrevised 0.6% gain in November, according to the Commerce Department's Census Bureau.

Critical Data Points:

• Core retail sales (excluding automobiles, gasoline, building materials, and food services) fell 0.1% in December
• November's core retail sales were revised downward from 0.4% to 0.2%
• Consumer saving rate dropped to a three-year low of 3.5% in November from 3.7% in October (down from 31.8% peak in April 2020)
• Q3 GDP growth reached 4.4% annualized, with Q4 projected at 4.2% by the Atlanta Federal Reserve

Market Implications:

The disappointing retail figures and downward revisions to November data suggest economists may lower their fourth-quarter consumer spending and GDP estimates. Core retail sales, which closely track the consumer spending component of GDP, are particularly concerning given their decline and backward revision.

Consumer spending has remained resilient despite economic pessimism driven by tariff-related price increases and labor market softening. However, this strength has come at the expense of savings, indicating consumers may be tapping into accumulated wealth from strong stock market performance and elevated home prices rather than current income.

Outlook:

The data places consumer spending and the broader economy on a slower growth trajectory entering the new year. The government's delayed fourth-quarter GDP report, scheduled for release the following week, will provide additional clarity on the economy's momentum heading into 2024.