What: January retail sales fall unexpectedly by 0.9% month-over-month, despite 4.8% year-over-year growth and positive performance in specialty retail and department store channels.

Why it is important: This mixed performance reveals the complex dynamics of post-holiday retail, where channel-specific growth and consumer sentiment volatility indicate evolving shopping patterns.

January 2025 retail and food service sales showed an unexpected 0.9% seasonally adjusted decline from December, falling short of economists' expectations for flat performance. However, unadjusted year-over-year sales rose 4.8%, with department stores growing 1.4% and apparel and accessories specialty stores increasing 3.6%. Cold weather boosted specialty store performance through increased sales of outerwear, while post-holiday promotions helped drive volume growth of 2.9% year-over-year in apparel. Consumer sentiment shows volatility, with the LSEG/Ipsos' Primary Consumer Sentiment Index dropping 3.2% in January before rebounding 0.9% in February. Experts anticipate modest but positive retail growth in 2025, though discretionary categories may face volatility as consumers continue shifting spending from goods to services.

IADS Notes: The unexpected 0.9% decline in January retail sales signals continuing shifts in consumer behaviour, though the year-over-year unadjusted growth of 4.8% suggests underlying resilience. This aligns with December 2024's observations about changing consumer spending patterns and increased price sensitivity. The contrasting performance between channels, with department stores showing 1.4% growth and specialty stores achieving 3.6% growth, reflects November 2024's findings about retailers needing to balance traditional approaches with new strategies. The volatility in consumer sentiment, while still above 2023-24 levels, mirrors August 2024's analysis of how retailers must adapt to evolving consumer preferences while maintaining operational efficiency.

US department store sales rose 1.4% amid a slowdown in January 2025