Kiplinger's Retail Outlook: Snow Slowed January Sales

November and December sales were revised down, but we expect a February rebound.

Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or to subscribe for the latest trends and forecasts from our highly experienced Kiplinger Letter team.

Wintry weather hit much of the eastern and central United States in January, slowing retail sales. Winter months often obscure underlying consumer spending trends because bad weather can keep shoppers at home. The modest drop in ecommerce sales could be an indicator that December’s sales strength would not have been maintained anyway, even without the weather effect. Also, November and December sales were revised down a large amount, reversing previous conclusions that consumers were in overdrive at the end of the year. 

Narratives on the health of the consumer will have to wait to see how big the expected February rebound in sales will be. The next Census Bureau retail sales data release will be on March 14. 

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

January sales excluding gasoline dropped 0.8%, the largest decline since last March. Sales were down in most categories, with the biggest drops in building materials (-4.1%), miscellaneous stores (-3.0%) and motor vehicles (-1.8%). There were some positives: furniture and home furnishings (1.5%), restaurants (0.7%), groceries (0.6%) and surprisingly, department stores (0.5%).

Consumer spending on services excluding restaurants rose a strong 0.7% in December, the latest month for which data are available. Services spending has grown at a brisk level, rising 6.4% at an annual rate over the four months from September to December, and 2.5% after adjusting for inflation. We expect a slowdown in January data because of the weather. 

A strong February sales rebound could make investors nervous that the Federal Reserve might delay its hoped-for interest rate cuts, but we expect a spending slowdown in the near future. The economy in general is due to cool a bit in the next six months, with a gradually weakening labor market. Saving rates have been much lower than their historical norms and will likely begin to rise slowly, cutting into future retail spending. Student loan repayments started up in October, and along with higher interest rates on consumer loans, that may weaken some households’ spending power.

Goods spending is also due to slow eventually because consumers will switch to buying more services as their need for goods levels off. Purchases of goods soared at the beginning of the pandemic in 2020. While services have picked up since then, the share of goods in household spending is still well above its prepandemic norm. That suggests a coming drop in goods buying as the economy slows.

Related content

David Payne
Staff Economist, The Kiplinger Letter

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.