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Retail sales excluding gasoline were little changed in December and January, but rose by a moderate 0.3% in January if motor vehicle sales are also excluded. Ice storms across the South and a mix of ice and snow across the Midwest, Mid-Atlantic and Northeast during the last week of January likely hurt monthly sales numbers, especially for motor vehicles (usually stored and shown outdoors), which dropped 0.9%. Given the inhospitable weather, it is not surprising that e-commerce sales jumped 2.0% in January. In-store and restaurant sales were both down 0.2%, however. Home furnishings and building materials sales did well in January, but sporting goods, health/personal care and clothing store sales all dropped by more than a percentage point in January. After-effects of the storms in early February are likely to have an impact on February sales when they’re reported, too.
Spending on services excluding dining rose a strong 0.7% in December (the latest month for which services spending data other than dining are available). January data will be available on March 27.
Holiday sales rose 3.7% from a year earlier, with in-store sales up 2.5%. That was nearly the same as last year’s gain, though it represents less growth in real spending because some of 2025’s sales gain was the result of higher prices instead of larger volumes.
Going forward, consumer spending may soften a little in the face of a few headwinds. Consumer sentiment measures are in the dumps, again, though they don’t seem to be correlated very strongly with spending. We expect that rising gasoline prices will dampen sentiment still further, and weak sentiment could have an impact on overall retail sales if it gets low enough. The recent decline in the stock market could deter previous spending plans among some high-income households. Also, wage growth is expected to slow somewhat. The hiring slowdown is creating job anxiety, even among people who are employed. Households tend to cut spending and add to savings when the possibility of losing a job looms. If the unemployment rate or initial claims for unemployment rise, that fear will intensify.
There could be a serious tailwind for spending, however: Tax refunds should be larger than normal, especially in the Northeast and Pacific Coast states, given the higher cap on state and local tax deductions on federal returns, plus other tax cuts. Estimates are that an extra $1,000 per household, or $100 billion total, may end up in consumers’ pockets, boosting GDP growth by up to half a percentage point.
