The US consumer’s stumbling. Or at least that was the message from the Commerce Department on Tuesday, when a belated update on nominal spending suggested Americans pulled back in the lead-up to Christmas.
Headline retail sales were flat in December from November, according to the delayed release, disappointing expectations for a small gain. Consensus wanted 0.4% from the print.
As the figure below shows, headline retail sales have been more or less flat for three of the last four months.
More concerning on Tuesday was the control group readout, which showed a decline. Economists expected a gain there too.
The control group miss will undercut GDP estimates for Q4 which were still tracking north of 4% headed into the week. Insult to injury: November’s control group gain was revised in half to show just a 0.2% increase.
Similar to the headline, both the ex-autos and ex-autos/gas gauges were unchanged. Consensus wanted advances from both of those aggregates, which is to say this release was a disappointment from top to bottom.
Food services and drinking places, the only services sector category in the report, showed nominal spending at restaurants and bars slipped 0.1%. The non-store retailers category managed the smallest of gains.
As BMO’s US rates team pointed out, the three-month moving average for the annualized pace of control group sales is now just 2.6%, down sharply from almost 6.5% prior to the longest US government shutdown on record.
“This implies a meaningful pullback in personal consumption in Q4,” the bank’s Vail Hartman said, adding that “in practical terms, it appears there was less momentum behind the consumer in the final months of 2025 than previously assumed,” which in turn implies “a less encouraging departure point for growth estimates in 2026.”
As it turns out, the deeply depressed and the recently laid off are less inclined to spend. Even in America.
Weather will be a headwind on January consumer spending, although investors should adjust it out.
I’d hate to be the guy who leads the Commerce department. His boss might be forgiving when it comes to socializing with untoward financiers, but not so much when it comes to publishing data that makes Dear Leader look bad.
Ironically as ever, the alcohol sector is showing signs of life for the first time in over 3 years, starting in Jan. Wholesale and producers will still face a tough year, but I’m betting many retailers are thinner than ever on inventory (I certainly am), that backlog affecting them may get cleared faster than many think.
And it’s not lost on me how this article lines up with the one about elevated consumer debt levels. The well is running dry, there.