Consumer Still Well Positioned to Drive Economic Growth

*       Overall retail sales fell 0.9% month-on-month in January; the biggest decline in almost two years.
*       Sales declined in nine of 13 categories.

*       The sharp monthly drop pushed the year ago growth rate down to 4.2% from 4.4% in December.
*       PNC expects consumer spending growth to moderate to a pace more in line with income growth this year.

Overall retail sales (including food services) declined 0.9% month-on-month in January from an upwardly revised 0.7% in January. This was well below the consensus forecast of a 0.2% drop and the first decline since August. The drop was led by sporting goods stores (-4.6%), motor vehicles & parts (-2.8%), nonstore retailers (-1.9%) and furniture stores (-1.7%). There were also declines in building material & garden stores (-1.3%), clothing stores (-1.2%), electronic & appliance stores (-0.7%) and health & personal care stores (-0.3%). Sales rose in only four of 13 categories with the biggest increases in gasoline stations (+0.9%, mostly due to higher prices) and restaurants & bars (+0.9%, and the only services category in the report). The data covered a period which included the wildfires in Los Angeles – the second-largest metro area in the U.S. – and severe winter weather in other parts of the country, which may have limited face-to-face shopping activity.

The sharp monthly decline drove the year ago growth rate down to 4.2% from 4.4% in December. Retail sales excluding autos fell a more modest 0.4%, while retail sales excluding autos and gasoline slipped 0.5%. Control retail sales – which excludes sales of food services, auto dealers, building materials, and gasoline stations and are used as a key input in the government’s calculation of consumer spending in GDP – dropped 0.8%, offsetting the 0.8% increase in December. The large monthly decrease pushed the year-on-year growth rate down to 3.7% from 4.4% in December.   

PNC expects consumer spending growth to moderate to a pace more consistent with income growth in 2025. Other supports to consumer spending growth include continued job gains, historically low unemployment, and elevated household wealth.

PNC Bank, National Association, is a member of The PNC Financial Services Group, Inc. (NYSE: PNC). PNC is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management.