Data released on Wednesday in the US showed Retail Sales dropped more than expected in December by falling 1.1%. Analysts at Wells Fargo point out that ten of 13 retailers saw sales fall in December while back-to-back declines in control group sales suggest a weak end to the year for goods spending. They see more weakness ahead as excess savings and recent real income gains fade.

Rough Finish to 2022 Sets the Stage for Spending Slowdown in 2023

“December was another ugly month for retail sales. Not only did sales decline 1.1% in the month, which was more than expected, but revisions to prior data left overall sales even lower. Excluding autos and gas stations, sales still fell 0.7% in December with ten of 13 categories posting declines.”

“Consumer goods prices slipped 1.1% in December, marking the fifth decline in six straight months, and so we estimate real retail sales were flat in the month. But slowing inflation wasn't enough to offset slowing demand. In short, even the "bright spots" in this report were rather grim.”

“We still broadly expect a gradual spending slowdown, and on goods specifically, is underway as tighter financial conditions, a slowing labor market and low-confidence weigh on spending this year.”