US retail sales slip in January as consumers dial down spending

US consumers made a decisive move to pull back their spending in January after stronger retail sales the month prior.

Retail and food services sales fell 0.8% from the previous month, according to US Census Bureau data released Feb. 15. Although economists expected sales to cool after robust spending around the holidays, the actual decline far surpassed the anticipated 0.1% drop, according to data compiled by Econoday. The sizable drop in sales may be a strong indication that consumers are finally feeling the pinch of inflation and higher interest rates.

The median default risk across retail categories decreased, with two retailers filing for bankruptcy between mid-January and mid-February.

Retail sales

US retail and food services sales amounted to $700.29 billion in January, down from a revised $706.18 billion in December 2023.

Sales for most business categories weakened in January compared to the previous month, with building material and garden equipment retailers' sales taking the greatest hit at 4.1%. While seasonality typically dampens sales for the category in the winter months, sales were also down by 8.3% year over year.

Miscellaneous store retailers — a category that includes florists, used merchandise stores and pet supply stores — registered 3% lower sales in January, while sales for gasoline stations and motor vehicle and parts dealers each declined by 1.7%.

Sales at furniture and home furnishing stores grew the most in January at 1.5% but were still 9.8% lower year over year.

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Comparing total sales for November 2023 through January 2024 to the same three-month period a year prior, sales of gasoline stations decreased 8% and sales of furniture and home furnishing stores fell 6.6%, the greatest declines in the retail sector. Overall retail and food services sales increased 3.1% over the same period.

Bankruptcies

Three retailers have sought bankruptcy protection so far in 2024 as of mid-February. Two of these retailers — pharmacy technology solutions provider MedAvail Holdings Inc. and medical apparel manufacturer Careismatic Brands LLC — filed for bankruptcy during the month ended Feb. 15.

Default risk

As of Feb. 14, the median default risk for all retail categories dropped to 2.3%, from 2.5% in mid-January.

Across 15 primary industries, the default risk increased for drug retail, food retail and household appliances, with the median default risk of the household appliances industry more than doubling over the month ended Feb. 14.

Computer and electronics retail saw the greatest decrease in default risk, falling to 2.3% from 3.9%.

Scores produced by the model represent the odds of default within a year and are based primarily on the volatility of share prices for public companies in the sector, accounting for country- and industry-related risks.