Retail sales dipped in December despite small inflation improvements

Monthly U.S. retail sales dipped 1.1% in December, despite small but noticeable improvements to inflation and pricing.

The end of 2022 was a stressful time for Americans as consumer finances tightened in response to two years worth of economic headwinds. Although economists correctly predicted a retail sales decline, the news is still disappointing to many who had hoped for a market recovery. Instead of participating in the normal holiday surge, buyers stayed at home even though inflation fell to 6.5% from 7.1% in November.

However, for auto sales the picture is less clear. Vehicle deliveries managed to surprise in December, climbing 7.3% thanks to increased vehicle production and attractive discounts. Whatever excitement automakers and dealerships may have shared, however, was brief as the final numbers for 2022 revealed the car market had experienced its worst year in over a decade.

Since publishing their end of year reports, Automakers and retailers have mentally prepared themselves for a difficult quarter. The beginning of the year is usually the worst time for sales, and, as it seems inflation improvements have yet to encourage buyer activity, consumers are unlikely to break tradition by spending their money. However, there is a good chance 2023 will bring a market normalization later in the year. Interest rate increases are likely to halt in the coming quarters, which would allow business to stop exaggerating prices to accommodate for unexpected lending costs. The Biden Administration’s electric vehicle tax credit is also likely to attract customers who have been waiting years for EV prices to drop. Whatever happens, auto sales have an excellent chance of surprising again by the end of the year, provided dealerships and manufacturers work together to push their advantages.

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