December retail sales were flat, falling well short of estimate

Consumer activity for the December holiday shopping season slowed sharply due to harsh weather conditions, tariff impacts and persistently high inflation, the Commerce Department reported Tuesday.

retail sales It remained stable on a monthly basis, following a 0.6% increase in November, according to seasonally adjusted but not inflation-adjusted figures. Economists polled by Dow Jones had expected a 0.4 percent increase. Sales excluding automobiles also remained unchanged despite the forecast for a 0.3% increase.

On an annual basis, sales rose 2.4%, a significant decrease from November’s 3.3% increase. Ex-automobile sales increased by 3.3% annually in December.

The report marks a sour end to an otherwise solid year for shopping activity; High-end consumers are spending fast through much of 2025, but those at the lower end of the income spectrum are being more cautious.

As the consumer price index increased by 2.7% in December, the shopping pace could not keep up with inflation.

While multiple categories reported losses in December, only a few recorded significant gains.

Miscellaneous retailers and furniture stores fell 0.9%, while clothing and accessories stores fell 0.7% and electronics and appliances dropped 0.4%. Online store sales rose just 0.1%, while building supplies and garden centers saw the strongest increase, up 1.2%.

“This is a K-shaped economy where senior spending is strong and middle- and lower-income consumers are spending much more cautiously,” said Heather Long, chief economist at Navy Federal Credit Union. “Retail sales were flat in December as spending on autos, home furnishings, appliances and clothing was soft. These products are hit hard by tariffs in 2025, and consumers have shifted their spending elsewhere.”

Fourth-quarter economic activity was otherwise strong, with the Atlanta Federal Reserve’s data tracker pointing to gross domestic product rising 4.2% year over year. However, this figure may be reduced on Tuesday following the retail sales figure. Consumer spending accounts for more than two-thirds of all economic activity in the US

The report comes a day ahead of the closely watched January nonfarm payrolls count. Economists expect the figure to increase by just 55,000, following an increase of 50,000 in December. However, some leading Wall Street firms say they are seeking a lower figure, and annual revisions are also expected to reduce previous employment growth.