US retail sales slowed down in January after a strong holiday season surge, however an industry expert notes fashion retailers kept the holiday spending spree going with promotions and discounts.

The latest data released by the US Census Bureau shows overall retail sales in January decreased by 0.9% to $723.9bn on a seasonally adjusted basis from the previous month but saw a 4.2% rise on an unadjusted basis compared to last year.   

This is a slight drop from December’s figures, which showed month-over-month increases of 0.7%, revised from up 0.4%, and year-over-year growth of 4.4%. 

National Retail Federation chief economist Jack Kleinhenz said: “It’s reasonable to expect some slowdown from the vigorous 2024 holiday season, so January’s numbers are not a surprise and don’t contradict the consumer spending trends we experienced.  

“The slower spending reflects weaker payroll growth in January, and higher prices remain a challenge for most households. 

“Cold weather in many parts of the country and wildfires in California were likely headwinds that disrupted demand and consumer patterns. Nonetheless, these results point to a stable economy and provide a solid start to 2025.” 

Retail sales for clothing and clothing accessories stores stood at $26.35bn, a decline of 1.2% on a seasonally adjusted basis from the previous month but saw a 1.4% rise on an unadjusted basis compared to last year. 

GlobalData retail analyst Neil Saunders said clothing retail saw a notable 3.6% surge in sales figures. He explained the increase was due to demand for winter wear spurred by lower temperatures, which saw consumers gravitate towards purchasing outerwear and other garments suitable for the season.

He also pointed out that shoppers capitalised on various discounts and deals offered by retailers eager to reduce their stock levels and extend the festive period’s buying momentum. Despite these incentives, inflation within the apparel sector remained subdued, with volume growth registering at approximately 2.9% compared to the same period in the previous year.

When focusing on core retail sales, which excludes automobile dealers, gasoline stations, and restaurants, the US retail figures mirrored the general trend with a month-over-month decline of 0.9% after seasonal adjustments but a 4% increase on an unadjusted year-over-year basis.  

Over a three-month moving average, core sales were up by 4.1% compared to the previous year. 

These figures follow a period where core retail sales grew by 4% year over year to a record $994.1bn during the holiday season of 2024 and by 3.6% to $5.28tn across the entire year. 

Last week, data from the CNBC/NRF Retail Monitor revealed that US retail sales declined in January 2025 from holiday highs, yet year-over-year growth signalled resilient consumer confidence.  

Saunders asserted “there will be a lot of nonsense spoken about this month’s retail sales numbers.”

He stated: “Most of it will come from the fact that sales have fallen on a month-over-month basis using seasonally adjusted data. As we have noted many times before, this is an indicator that is both illogical and completely divorced from reality. No retailer assesses their sales on a month-over-month basis and, even if they did, it is hardly revelatory that January sales would be lower than those in a month that contains Christmas and various other holidays which propel spending. Seasonal adjustment is supposed to strip out these variations but, in truth, it is a very faulty statistical tool that manipulates real data and turns it into numbers based on little more than guessing.

“Based on the real data, retail sales grew by 4.8% compared to the same period last year. Core sales, which exclude gasoline, autos, and foodservice, increased by 4.0%. These are both very respectable levels of growth which means the year has started off on a strong note. Of course, inflation is included in these numbers and when that is stripped out, underlying volumes for core retail grew by a more modest 1.6%. However, given the spending splurge over the holidays, which included consumers taking on more debt, we see this as something of a win for a retail sector that could have come under significantly more pressure.”

He also noted that as the political landscape in Washington underwent a significant transition with Trump becoming president, the discourse surrounding potential tariff adjustments gained momentum. This speculation prompted a segment of consumers to accelerate their buying decisions, seeking to pre-empt any surge in prices that could result from the anticipated policy changes.

Saunders added: “Overall, retail will be highly satisfied with the start to the year. The challenge will be to keep this kind of momentum going. And on that front, there are a lot of potential headwinds from sticky inflation, high debt levels, and a suppressed housing market. The uncertainty of tariffs and their impact on prices adds another changeable dimension. Factoring all of this in, we think that growth may become more subdued as the year progresses, but that retail will remain in positive territory.”

 By Just Style