This was less than the growth of 0.6 percent in November, which was boosted by the end-of-year shopping season.But spending appeared to lose momentum and fell short of expectations from economists polled by Dow Jones Newswires and The Wall Street Journal, who instead expected growth of 0.4 percent.
The Commerce Department report showed declines in several categories, including car dealerships, furniture stores and electronics stores, as well as restaurants and bars.
Sales at car dealers fell 0.2 percent from the previous month, while those at furniture stores fell 0.9 percent. Turnover at restaurants and bars fell by 0.1 percent.
But consumers continued to spend money on essentials such as groceries. “Consumer spending has finally caught up with consumer confidence, and not in a good way,” said Chris Zaccarelli, chief investment officer of Northlight Asset Management.
For months, Zaccarelli said, households continued to spend despite concerns about rising costs.
But the latest data indicates that consumers are no longer ruthlessly increasing their spending, he said.
The question now is whether the shift is temporary. This could be the case if the labor market remains resilient and consumers see more money in their wallets thanks to measures under President Donald Trump’s One Big Beautiful Bill Act.
Otherwise, “it could be the canary in the coal mine signaling a more serious slowdown,” Zaccarelli said.
– ‘Starting to get tired’ –
If a consumption slowdown continues, it would hit the main driver of the US economy, with consumer spending accounting for more than two-thirds of GDP.
US consumer confidence fell to the lowest level since 2014 from January, according to The Conference Board.
Economist Oliver Allen of Pantheon Macroeconomics said weak retail sales in December and downward revisions to earlier months’ figures “provide clearer signals that consumers are starting to tire.”
He noted that the trend for auto sales now appears “flat to declining,” while a dip in foodservice sales “rounds out a relatively weak quarter.”
Allen expects the pace of spending growth to be unsustainable in the second half of 2025.
“Real income growth has slowed to a crawl recently, partly due to weakness in the labor market,” he said.
“Only households could only increase their spending by as much as they did by saving much less.”
Compared to a year ago, retail sales rose 2.4 percent in December, also a slowdown from November’s pace of growth.
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