Shoppers put away their pocketbooks after splurging some for the holidays.
January retail and food service sales fell a seasonally adjusted 0.9 percent from December, according to the Census Bureau’s monthly tally.
While the month was expected to be soft — impacted by wildfires in California and wintery weather in the south — the decline still surprised economists, who had penciled in flat sales, according to FactSet.
But it will take longer to determine just how the year is going to shake out and the seasonal adjustments made to compare one month to the next can introduce some static to the numbers.
Unadjusted January sales rose 4.8 percent from a year earlier, including a 1.4 percent increase at department stores and a 3.6 percent rise at apparel and accessories specialty stores.
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Neil Saunders, managing director of GlobalData, said cold weather helped specialty stores drive sales of outerwear and warmer styles.
“There was also a helpful boost from shoppers taking advantage of discounts and bargains that were on offer after the holidays, as retailers tried to clear down inventory and keep the holiday spending spree going,” Saunders said. “Because of the promotions, inflation remained low in apparel and volume growth came in at around 2.9 percent on a year-over-year basis.”
But it’s still a tricky consumer climate to read, particularly with Washington in flux as President Donald Trump remakes the federal government and resets America’s relationship with the world.
The LSEG/Ipsos’ Primary Consumer Sentiment Index fell sharply last month with a 3.2 percent decline, but rebounded some on Friday in its February reading, which showed a 0.9 percent increase.
Johnny Sawyer of Ipsos said: “The index has shown volatility since last November’s elections, alternating gains and losses the past three months. However, Americans’ confidence in the economy is still significantly higher than it was at this time in both 2024 and 2023. As the new administration’s economic vision starts to take shape, it remains to be seen if American consumer sentiment starts to stabilize or if this is the start of a prolonged period of uncertainty.”
It’s the kind of environment that’s going to keep brands on their toes, especially as consumers were already shifting some spending from goods into services.
“We expect 2025 retail sales growth to be modest albeit positive given a still-healthy consumer, with volatility in discretionary categories due to the interplay between goods and services,” said David Silverman, senior director at Fitch Ratings. “Tariffs and other policy initiatives remain outstanding variables that could impact inflation and spending habits as the year progresses. Operating flexibility and the ability to respond to and invest in competitive differentiators will be key for retailers to effectively manage through the year.”
