Retail spending outperformed predictions for December
JUANA SUMMERS, HOST:
Santa had a lot of helpers last month as Americans snapped up toys, clothes and sporting goods. New figures from the Commerce Department today show that Americans spent freely during December, and that capped off a solid holiday shopping season. That is important because consumer spending is such a big driver of the overall U.S. economy. NPR's Scott Horsley is here with details of how much we spent and what we spent on it. Hello, Scott.
SCOTT HORSLEY, BYLINE: Great to be with you, Juana.
SUMMERS: So, Scott, big picture here, what did the receipts tell us?
HORSLEY: December was a pretty good month for retailers. And as you said, it rounds out a pretty good year. Retail sales rose six-tenths of a percent between November and December. That's better than forecasters had expected, and it suggests that shoppers rolled into the new year with no sign of hitting the brakes.
TIM QUINLAN: It has not been a winning bet to turn against the U.S. consumer. That's for sure.
HORSLEY: Tim Quinlan is an economist who tracks retail spending at Wells Fargo. He says one surprise is that cash registers at department stores were ringing loudly last month after what had been a pretty lackluster year.
QUINLAN: Department stores were one of the best performing categories, at least on a month-over-month basis. Department stores really could have used the help this month, and they certainly found that.
HORSLEY: Kind of a throwback there with lots of gift-wrapped Macy's and Kohl's boxes under Christmas trees around the country. Department store sales were up 3% in December. Sales were also up at bookstores and sporting goods stores. And, oh, by the way, internet retailers did pretty well too.
SUMMERS: Hearing a whole lot of up, up, up from you there. Were sales down anywhere, though?
HORSLEY: They were. Sales at gas stations were down in December. Of course, gasoline prices have come down over the last year, and that left shoppers with more money to spend elsewhere. Furniture sales were also down last month and most of last year. They tend to follow home sales, which have been depressed for a while as a result of high mortgage rates. Restaurant sales were also flat in December, and that was kind of surprising because for most of last year, people were flocking to restaurants. Their sales jumped more than 11%, which is more than twice the increase in restaurant prices. Maybe in December, people just opted to enjoy a little more home cooking. And grocery stores' sales were up a little bit last month.
I should note this retail report we got today is an important indicator, but it's not the whole story. We're going to have to wait until next week to get a more complete picture of consumer spending on services like travel and entertainment.
SUMMERS: Scott, what I'm hearing from you suggests that 2023 ended on a high note, but I have to ask, how long can people keep up this level of spending as we are moving into the new year?
HORSLEY: Yeah, that's the trillion-dollar question, and there's a lot riding on it. Economist Quinlan thinks we might see some moderation in spending growth this year but no sudden slowdown. Earlier this week, the Federal Reserve Bank of New York released a survey showing that a lot of people do plan to be a little more cautious in their spending this coming year. Of course, Quinlan says that's kind of like when I say I plan to eat healthier and exercise more.
QUINLAN: What people say they're going to do often is a reflection of their noblest ambitions. In practice, I don't think that it's particularly helpful for gauging where consumers go. Ultimately, you know, the only thing that's going to stop this consumer is if the credit card gets taken away or if the cost of financing it becomes too prohibitive.
HORSLEY: The jump in retail spending in December was bigger than the average pay raise that month, and that probably can't go on indefinitely. Some people are leaning more on their credit cards. You know, credit card debt has grown to a record high of more than a trillion dollars. And for people who don't pay off their balance every month, which is nearly half of all credit card users, this is very expensive debt. The average interest rate on credit cards is nearly 23%.
SUMMERS: NPR's Scott Horsley. Thank you.
HORSLEY: You're welcome.
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