WASHINGTON (AP) – With the job market on a roll and gas prices falling, consumers are spending away, right?
Not quite. Americans actually cut back last month after ramping up spending in November, perplexing analysts who had expected strong retail sales in December in light of rising job growth and sinking gas prices.
Sales fell a seasonally adjusted 0.9 per cent from November to December, the Commerce Department said Wednesday. It was the largest drop since January. Much of the decline didn’t actually reflect a diminished consumer appetite: Americans spent less at the gas station because of those lower fuel prices – a decline that’s included in the retail sales figures.
That said, sales in most other categories lost ground, too.
Yet analysts see no need to worry yet. Most think consumers will bounce back in coming months on the back of healthy job gains and rising confidence. Economists say many temporary factors likely held back sales in December.
Excluding the volatile categories of gas, autos, building materials and restaurants, sales dropped 0.4 per cent after rising 0.6 per cent in November. Online and mail-order sales fell 0.3 per cent, the most since April.
November’s strong sales might have caused shoppers to pull back last month, economists said. Before slipping in December, for example, auto sales had soared in November.
And the financial benefit of falling gas prices can take time to register with consumers. It may take a month or two of persistent savings before consumers begin to spend the windfall.
With hiring still healthy, consumer confidence rising and households reducing their debt loads, most economists expect Americans to spend at a healthy pace this year, supporting solid economic growth.
“This isn’t the start of a collapse in activity … as that doesn’t fit with the strength of employment growth and consumer confidence,” Paul Diggle, an economist at Capital Economics, said in a note to clients. “As such, retail sales will strengthen again before too long.”
And holiday retail sales overall, which include both November and December data but exclude gas, autos, and restaurant spending, were the highest since 2011, according to the National Retail Federation and some independent economists.