Americans cut back on spending in December, the second consecutive month they’ve done so, underscoring how inflation and the rising cost of using credit cards slowed consumer activity over the crucial holiday shopping season.
NEW YORK —
Excluding sales from auto and gasoline, retail sales slipped 0.7%. Retail sales are not adjusted for inflation unlike many other government reports. Higher prices inflate sales, while lower prices push sales down. December spending may also have been trimmed by an early start to the shopping season after last year’s supply chain mess.
Low unemployment and wage gains have so far supported consumer spending, but Chadha said in coming months, Moody’s expects consumers to be increasingly “selective” in their spending in the first half of the year. Solid hiring, rising pay, and savings beefed up by government financial support during the pandemic enabled most Americans to keep up with rising prices. That government assistance has long ended, however, and some Americans have dipped into savings accounts since then. Credit card defaults are on the rise with some households slow to adjust their spending to a new reality.
There has been a pushback from consumers that have grown weary of rising prices, forcing retailers to cut prices to clear inventory.
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