Retail sales fall modestly in January as American consumers pull back on spending

By MATT OTT and ANNE D’INNOCENZIO, AP Business Writers

American consumers pulled back their spending to start 2026, extending the malaise in retail sales that began late last year.

Retail sales fell 0.2% in January, following a flat reading in December, according to the Commerce Department’s report issued on Friday. January’s figure came in below the forecasts of economists, who were expecting another flat reading, The report was delayed because of the 43-day government shutdown.

However, the January figure was weighed down by a sales decline at motor vehicle and auto parts dealerships. Gas stations also saw a drop, reflecting a decline in gas prices in January, though the intensifying war in the Middle East is driving up prices in recent days. Excluding those two categories, sales were up 0.3%, according to the Commerce Department.

Economists also believe that severe winter weather also hurt sales as shoppers were unable to go to physical stores. In fact, online retailers enjoyed a 1.9% sales increase in January.

Health and personal health stores were among the worst performers, falling 3% from December. And sales at clothing stores fell 1.7% from December. Consumer electronics and appliance retailers also struggled with sales declines.

Among the categories that saw gains were home furnishings and building materials, which includes landscape and gardening supplies.

The snapshot offers only a partial look at consumer spending and doesn’t include many services, including travel and hotel lodges. But the lone services category – restaurants – registered a dip of 0.2%.

The retail sales report comes as major retailers in recent weeks have reported their fiscal fourth-quarter reports, and so far the results have been a mixed bag.

Walmart Inc. delivered another impressive quarter as lower prices and speedy deliveries attracted Americans ranging from cash-strapped to wealthier households. But rival Target reported earlier this week another quarterly decline in profits and sales during the critical holiday period as the discounter struggles with its own merchandising missteps and confronts a consumer who is focusing more on essentials.

Meanwhile, Home Depot’s fourth-quarter performance was tempered by ongoing caution from American consumers in a weak housing market, but the home improvement retailer’s results topped Wall Street expectations.

Retailers are confronting a shifting tariff landscape, making it hard for retailers to make decisions on hiring and merchandise orders.

The Supreme Court struck down the biggest and boldest of Trump’s tariffs – though President Donald Trump is replacing them with new ones. The job market remains under strain as uncertainty around tariffs and the economy have made employers cautious about hiring.

American employers unexpectedly cut 92,000 jobs last month, according to the Labor Department’s report on Friday. The unemployment rate moved up to 4.4%. Hiring deteriorated from January, when companies, nonprofits and government agencies added a healthy 126,000 jobs. Economists had anticipated 60,000 new jobs in February.