U.S. Retail Sales (January 2026)

Retail sales fail to grow for the second consecutive month in January

• Following a flat reading in December, sales for retail and food services declined by 0.2% month-over-month (m/m) in January. The headline figure was similar to the consensus forecast, which called for sales to pull back by 0.3% month-over-month (m/m).
• Sales of autos and parts declined by 0.9% m/m and sales at gasoline stations fell by 2.9% m/m. Meanwhile, building and garden retailers had another solid month, with sales advancing for the third consecutive month (+0.6% m/m). 
• Sales in the "control group", which excludes the three categories above, fared better, rising by 0.3%. Growth was led by higher sales at non-store/online retailers (+1.9% m/m), miscellaneous retailers (+2.0% m/m), and furniture (+0.7%) and general merchandise stores (+0.4% m/m). On the other hand, there were notable declines in sales at health & personal care (-3.0% m/m) and clothing (-1.7%) stores, as well as stores selling sporting goods & books (-1.2% m/m). 
• Following a soft reading in December, spending at bars and restaurants remained weak in January, edging down by 0.2%. This is the only service category in the report.

Key Implications

• Retail sales began the year on a somewhat stronger footing than they ended in 2025. Even as the headline declined, sales in the "control group" used for GDP estimation rose during the month, and December’s figure was revised slightly upward (to 0% from -0.1% previously). Nevertheless, performance remained uneven, with several categories recording substantial declines, likely attributable to the severe winter weather in late January. A notable drop in auto sales, alongside declines across many other retailers and a strong rebound in online sales, underscores the weather-related impact. This suggests a likely rebound in February—a trend already reflected in the latest auto sales data.
• Although we expect consumer spending growth to moderate to about 2% at the start of 2026, spending is projected to remain robust throughout the year, with growth averaging around 2.7%—just slightly slower than last year. Households will benefit from OBBBA-related fiscal measures, including higher tax refunds and lower income taxes. Tax refunds, most of which are anticipated to arrive between February and April and be $800–$1,000 higher than last year, will provide a temporary boost to income and spending. However, persistently elevated gas prices pose a downside risk to the outlook; if they continue for an extended period, they could reduce growth in consumer spending by approximately 0.1 percentage point (see commentary).

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