U.S. retail sales from Nov. 1 to Dec. 24 grew only 3.1%, matching inflation and indicating that consumers are feeling the effects of poor economic conditions, according to a report from Mastercard.
The slow growth for retail sales for the holiday season pales in comparison to the last two years, with sales growing 5.3% year-over-year in 2022 and 13.5% in 2021, the largest percentage increase in 20 years, in non-inflation-adjusted terms, according to the National Retail Federation. The U.S. has seen heightened inflation under President Joe Biden, peaking at 9.1% year-over-year in June 2022 and decelerating to 3.1% as of November, far from the Federal Reserve’s 2% target.
“The caution that they’ve taken on their spend and where they’re spending has been really noticeable in the second half of the year, where a lot of customers have been affected, especially lower-income and middle-income,” Jessica Ramirez, a retail research analyst at Jane Hali and Associates, told The New York Times.
Sales for restaurants saw the biggest growth, increasing 7.8% from the previous year, while apparel increased 2.4% and electronics declined 0.4%, according to the report. Online sales led the gains in 2023, similar to the last two years, increasing 6.3% for the year as opposed to 10.6% in 2022.
The poor growth in holiday spending follows slowing consumer spending in October, increasing only $41.2 billion, a 0.2% gain compared to 0.7% in the previous month. The cumulative amount Americans are holding in savings has also been dwindling amid harsh economic conditions, totaling only $768.6 billion in October compared to over $1 trillion in May and almost $6 trillion in April 2020.
As savings shrink and high interest rates make debt more expensive, more Americans are using buy now and pay later services like layaway to buy goods instead of using credit cards. Credit card debt exceeded $1 trillion for the first time in 2023, while delinquencies on all forms of debt, excluding student loans, increased rapidly in the third quarter of 2023.
Small businesses in particular are being hit hard by the lack of retail spending, with a recent poll from Goldman Sachs showing that 76% of small business owners had seen no increase in sales during the holiday season. The resulting profit loss led 70% of small business owners surveyed to say that their own personal spending plans for their families were impacted by the slowdown.
Will Kessler on December 26, 2023
