(PatrioticPost.com)- For the second straight month, Americans decreased the amount of money they spent at retail stores in December, underscoring just how much inflation as well as rising interest rates have slowed activity in the consumer sector.
Recently, the Commerce Department reported that retail sales dropped 1.1% in December, which was worse than many people were expecting. That followed November’s drop of 1%.
Normally, that would be a very poor sign for retail stores, which rely heavily on the months of November and December to fuel their performance for the entire year. And while the drops certainly weren’t welcome news, they were offset a bit by the 1.3% increase in retail sales in October, which happened because many people started their holiday shopping earlier this year.
The 1.1% drop in December was the biggest decline for one month in the entire year.
Another major contributing factor to the overall drop in retail sales was the auto sector. Sales there dropped a bunch thanks to interest rates rising so fast that it makes auto loans unaffordable for many.
At their December meeting, the Federal Reserve Bank raised its benchmark interest rate yet again, for the seventh time in 2022. They are making these moves in an attempt to dissuade people from spending — which obviously worked — since the central bank believes that will eventually help to slow inflation.
An even worse sign for the economy is that if you take out sales from gasoline and auto, retail sales still dropped 0.7% in December. Since retail sales are never adjusted for inflation — which is different than most other reports the government issues — it’s a true representation of what consumers are thinking.
Following the release of this information Mickey Chadha, the vice president of Moody’s, commented in a report:
“These are cracks appearing in the resiliency that consumers have shown in 2022, as higher prices, interest rate increases and the uncertainty of the macroeconomic environment finally take their toll.”
To this point, consumer spending has been supported by gains in wages and the overall lower unemployment rate. That being said, Moody’s believes that in the next few months, consumers will start to become “more selective” with how they spend their money.
The firm also believes that many consumers are likely to put off certain purchases, which could put a real damper on sales in the retail sector for the first two quarters of 2023.
In many of the key categories of “gift giving,” sales dropped in the last month of the year. That included a 1.1% decrease for appliance stores and electronics, a 2.5% decrease at home furnishing and furniture stores, a 6.6% drop at department stores, and a 1.1% drop at online stores.
It seems that inflation and rising interest rates may have finally caught up to the solid jobs market, the increase in wages that employees have experienced overall and the financial support the government gave out during the COVID-19 pandemic.
