US Retail Sales Flat In December As Consumers Pull Back

US retail sales stagnated in December 2025, undershooting market expectations and signalling a potential slowdown in consumer spending at the close of the holiday season. According to advance data from the US Census Bureau, total retail and food services sales were reported at $735.0 billion, unchanged on a seasonally adjusted basis from November, and well below the 0.4% growth forecast by economists.

Year-on-year, sales were up 3.7%, but the flat monthly reading (0.0%) underscored a clear loss of momentum in the key consumption metric that drives more than two-thirds of the American economy.

This unexpected pause in retail activity comes after a 0.6% gain in November, buoyed by holiday shopping, and reflects broad softening across categories as consumer behaviour shifted amid economic headwinds and modest job market gains.

What Are The Key Figures Behind The Flat December Retail Sales?

Detailed component data show that 8 of 13 major retail categories posted declines in December sales. Notable weak spots included:

• Furniture and home furnishing stores: down by 0.9%

• Miscellaneous store retailers: -0.9%

• Clothing and accessories: down by 0.7%

• Electronics and appliance stores: -0.4%

• Motor vehicle and parts dealers: -0.2%

Meanwhile, modest gains were recorded at building material and garden equipment dealers (+1.2%), sporting goods and hobby stores (+0.4%), gasoline stations (+0.3%), and food and beverage outlets (+0.2%), but these were not enough to lift the headline figure.

How Did Control Group Sales Behave?

Measures that strip out volatile categories such as auto dealers, gasoline stations, building materials and restaurants are regarded as a better proxy for underlying consumer spending on goods feeding into the GDP calculation. In December, control group sales edged down 0.1%, the first monthly decline in several months, adding to concerns about shallow demand.

This suggests that even beyond headline figures, fundamental spending strength appears to be tempering.

Why Is Consumer Spending Slowing?

According to the economists key reasons behind the falt consumer demand are:

• Household sentiment has weakened, with consumer confidence indexes near multi-year lows.

• Employment growth has slowed compared with earlier post-pandemic years, thus reducing discretionary spending power.

• Rising costs of essentials, groceries, rent and utilities have constrained budgets.

• Many consumers likely brought forward purchases to earlier months to take advantage of discounts and avoid expected price rises from tariffs. This leaves less income to spend by December.

While total retail sales were flat in December, according to separate Commerce Department data released last month, e-commerce growth slowed earlier in the season. Online sales had still grown year-on-year, but at a slower rate than broader retail, and are trending lower relative to overall retail in November.

What Does Flat Retail Sales Mean For The US Economy?

The flat retail sales are likely to temper third-quarter and fourth-quarter GDP growth forecasts. Consumer spending is the largest single component of US economic output. Some forecasters have already pared back expectations for early 2026 growth after feeding this data into broader economic models.

In financial markets, the softer retail data have briefly boosted expectations for future Federal Reserve rate cuts.

What Does This Mean For The Indian Economy?

Although India’s consumer economy follows its own dynamics, the US slowdown may have some indirect implications:

• Weaker US retail demand could temper global trade, potentially easing import costs for countries like India.

• US monetary policy responses to weaker consumption may influence the global capital markets and the rupee’s position.

• Firms in India selling to the US market may experience fluctuations in demand.

Key Takeaways

• Headline retail sales were flat in December 2025 at $735 billion, below the expected 0.4% growth.

• Core consumer spending measures slipped, with control group sales down 0.1%.

• Multiple major retail categories like furniture, clothing, electronics and autos recorded declines.

• Consumer sentiment and labour market growth have softened, constraining discretionary spending.

For investors, this points to a slowdown in consumer spending. That could put pressure on retail and other discretionary sectors in the near term. At the same time, softer demand may shift attention toward upcoming economic data and how policymakers respond if growth continues to ease.

Sources:

Trading Economics

Trading Economics

Seeking Alpha

AP News

Census