Boosted by strong holiday business, retail is on the rise
By Joe Higgins, Quest for Quality
This week, the U.S. Census Bureau released its monthly retail sales report for December 2023. The numbers showed a 5.59% increase in overall U.S. retail sales last month over the prior year period. Taking into consideration that the figures are not adjusted for inflation, Americans are spending at a pace that is well ahead of the 3.4% increase in the Consumer Price Index in December.
See: Inflation Still Smoldering
Retail Sales 2023
These moderating spending growth numbers, coupled with cooler price gains, are consistent with an economy achieving a “soft landing,” wherein inflation is tamed without a recession.
In another welcome surprise for retailers, it also turns out that Christmas shopping exceeded all expectations, according to the U.S. Commerce Department.
Broken out by distribution channel, December sales at furniture stores declined 1% from November but were up 4.7% from a year ago. Sales at appliance and electronics stores were down 0.3% from November but were ahead 10.7% over December 2022.
While these retail spending numbers constitute just a single data point, they do suggest that the U.S. economy is trending upward as we move through 2024. Retail sales increased every month in 2023 in the face of 11 interest rate hikes by the Federal Reserve over the past 22 months. While this rise in retail sales is good news, it presents a dilemma for the Fed, as it must proceed with caution about cutting interest rates this quarter or next. Officials will carefully watch inflation readings and other data as they contemplate cutting rates later in the year.
Consumer spending, which makes up about two-thirds of the U.S. economy, is expected to help drive growth throughout 2024. However, the expansion is likely to slow to a 1% rate later in the year, as the labor market moderates and the effects of higher interest rates are felt.
Takeaway
It’s good news that consumers continue to shop and are actively spending money in our economy — and at our members’ stores.
Joe Higgins is a 44-year veteran of GE and Whirlpool Corp. who brings his executive experience to bear as a business consultant, AVB keynoter and YSN contributor. Visit his website, Quest 4 Quality with Joe, at Q4QwithJoe.com.
