NEW YORK ( Associated Press) – Americans cut spending for the second month in a row in December, highlighting how inflation and rising credit card costs impacted consumer activity during the crucial holiday shopping season.
The Commerce Department reported Wednesday that retail sales fell 1.1% in December — worse than expected — after a revised 1% drop in November. In October, retail sales rose 1.3%, partly due to early Christmas sales.
Car sales fell as rising interest rates for loans reduced demand. That, and a drop in the price of gasoline contributed to a decline in retail sales overall. The December figure marks the biggest monthly decline in 2022.
The Federal Reserve raised its key interest rate in December for the seventh time through 2022 just to try to tame spending and inflation.
Retail sales, excluding auto and gasoline sales, fell 0.7%. Retail sales are not adjusted for inflation like other government reports. Higher prices increase sales, while lower prices decrease them. Spending in December could also fall because Christmas shopping has already begun after last year’s supply chain disruption.
Also on Wednesday, the National Retail Federation, the country’s biggest retail group, said Christmas sales rose a lower-than-expected 5.3% in November and December, according to government data calculations. This was a steep drop compared to the 2021 holiday season, when sales were expected to increase by 13.5%.
“2022 is showing cracks in the resilience that consumers have shown in the face of higher prices, rising interest rates and uncertainty in the macroeconomic environment,” said Mickey Chadha, vice president at Moody’s.
Low unemployment and rising wages have supported consumer spending so far, but Chadha said Moody’s expects consumers to become increasingly “selective” in their spending in the first half of the year.
Associated Press writer Chris Rugber in Washington contributed to this report.