Holiday sales disappointed

February 10, 2026

December retail sales held steady after rising 0.6% in November. Excluding autos, retail sales were flat. Both readings fell short of expectations for a 0.4% rise. Consumer demand fizzled as the holidays drew to a close. We estimate holiday retail sales added 3.6% compared to a year ago, falling short of the National Retail Federation’s projection of 3.7% to 4.2%. It looks like tariff-induced inflation and concerns about the job market soured holiday spirits.

A number of categories expected to fare well over the holiday period failed to draw shoppers in December. Apparel store sales declined 0.7%, electronics and appliance stores fell 0.4%, health and personal care decreased 0.2% and furniture store sales lost 0.9%, the latter category especially hard hit by tariffs. High-end furniture stores are easily passing on price hikes but discounters are struggling.

Department store sales fell 0.7% while big-box retailers continued to outperform due to their pricing power. They drew from all shoppers including affluent households. The overall general merchandise category slipped just 0.1%.

Consumers limited celebrations at bars and restaurants, where sales fell 0.1%. The losses are larger after adjusting for inflation. Even shopping at home or on a phone was not noteworthy as online sales rose a tepid 0.1% in December.

Sales of big-ticket items were weak. Motor vehicles and parts sales fell 0.2%. Although new vehicle prices were unchanged in December, after four straight months of increases, car buyers held back. One in five new vehicle loans is now seven years in duration while the average transaction price exceeded $50,000 at the end of last year.

Core retail sales, which feed into the calculation for consumer spending for GDP, edged lower by 0.1% which follows a downwardly revised 0.2% in November. Those figures pose a modest downside risk to our current projection of 3% growth for consumer spending in the fourth quarter and GDP growth of 3.9%. Core retail sales exclude spending on eating and drinking places, vehicles, gasoline and building materials stores.