U.S. retail sales in December saw the worst monthly drop since July 2021 and the second consecutive monthly loss, due to declines in purchases of motor vehicles and a variety of other goods, placing the economy and consumer spending back on a slower growth trajectory heading into 2023.
Last month, retail sales were down 1.1%. The original report of a 0.6% drop in sales for November has been revised upward to indicate a 1.0% drop. Sales were expected to fall by 0.8%, according to a Reuters poll of economists. In December, retail sales jumped 6.0% from the previous year.
The second consecutive monthly decline in retail sales, which are predominantly goods, is impeding factory production. Data released on Wednesday indicated that manufacturing output fell by the most in nearly two years in December, while producer prices dropped month over month.
The Federal Reserve is expected to slow the tempo of its rate hikes even further next month in response to broad signals of weakening demand and subsiding inflation, but will not stop its monetary policy tightening anytime soon as the labor market remains tight. The current pace of rate increases by the Fed is the quickest since the 1980s.