December Retail Sales - Inflation Takes a Bite

December retail sales declined 1.9% month-over-month (-2.4% adjusted for inflation); missing forecasts. Retail spending declined 1.9% in December, following a 0.2% gain in November, suggesting that elevated inflation levels are beginning to weigh on consumers. December data showed softer spending at furniture, electronics, and sporting goods stores and a more meaningful dip in online spending compared to November.

December retail sales (real) up 9.9% year-over-year. Retail sales growth has been exceptionally strong throughout 2021 and December was no exception. For perspective, the total value of retail sales in December was $627B – 19% higher than the $526B reported in February 2020 (pre-pandemic) and 17% higher than the $536B reported in December 2020 – see chart below. We expect demand to normalize somewhat in 2022, but would also look for inflation levels to begin moderating.