Tariffs, category declines, and labor data frame a mixed economic close to 2025
U.S. retail sales showed little growth in December, pointing to a widening gap in consumer behavior between higher-income households and more cautious middle- and lower-income shoppers.
Advance estimates from the U.S. Census Bureau showed retail and food services sales totaled $735.0 billion in December 2025, virtually unchanged from November, following a revised 0.6% monthly increase.
The data were adjusted for seasonal variation and holiday and trading-day differences but not for price changes. Economists surveyed by Dow Jones had expected a 0.4% increase. The 90% confidence interval for the monthly change included zero, indicating insufficient statistical evidence to conclude that sales differed from the prior month.
Excluding motor vehicles and parts, sales were also flat for the month. Retail trade sales overall were unchanged from November and rose 2.1% from December 2024.
Annual growth trails inflation
On a year-over-year basis, total retail and food services sales increased 2.4%, slowing from a 3.3% pace in November. The annual gain lagged inflation, as the consumer price index rose 2.7% in December. Sales excluding autos were up 3.3% from a year earlier.
A narrower control group measure that excludes autos, gasoline, building materials and food services and feeds directly into gross domestic product calculations declined 0.1% for the month. Consumer spending represents more than two-thirds of total U.S. economic activity.
Spending patterns diverge across income levels
The December figures closed a year marked by uneven spending. Data earlier in 2025 showed continued outlays among higher-income households, while consumers with lower incomes exercised more restraint. The year-end results indicated that difference remained evident during the holiday shopping period.
“This is a K-shaped economy with strong spending from the top and much more cautious spending from middle- and lower-income consumers,” said Heather Long, chief economist at Navy Federal Credit Union. “Retail sales were flat in December, driven by soft spending on autos, home furnishings, appliances and clothing. These items were hard hit by tariffs in 2025 and consumers shifted their spending elsewhere.”
Category results show uneven monthly movement
Several retail categories recorded monthly declines. Furniture and home furnishings stores posted a 0.9% drop, while electronics and appliance stores declined 0.4%. Clothing and clothing accessories stores fell 0.7%, and miscellaneous store retailers also recorded a 0.9% decrease. Online sales rose 0.1%.
Building material and garden equipment dealers reported the strongest monthly increase, with sales up 1.2%. Food and beverage stores rose 0.2%, and grocery store sales increased 0.1%.
Full-year sales rise, fourth-quarter growth remains firm
For all of 2025, total retail and food services sales increased 3.7% from 2024. Sales for the October through December period rose 3.0% from the same period a year earlier. Nonstore retailers reported a 5.3% year-over-year increase in December, while food services and drinking places were up 4.7%.
Fourth-quarter economic activity otherwise remained firm. The Atlanta Federal Reserve’s GDPNow tracker pointed to growth running at a 4.2% annualized pace, though the estimate may be revised following the December retail data.
The retail report preceded the January nonfarm payrolls release. Economists expect payrolls to increase by 55,000 jobs, following a gain of 50,000 in December. Several Wall Street firms have projected a lower figure, citing annual revisions expected to reduce prior job growth.
Additional data showed moderating labor cost growth. The employment cost index rose 0.7% in the fourth quarter of 2025, below a 0.8% forecast. For the year, total compensation costs increased 3.4%. Import prices rose 0.1% in December and were unchanged from a year earlier, while export prices increased 0.3% on the month and rose 3.1% year over year.
