U.S. retail sales were virtually unchanged in December, missing economists’ forecasts and capping a fourth quarter marked by early holiday shopping that left traditional retailers struggling.
The Census Bureau reported Tuesday that retail and food service sales were flat on a seasonally adjusted basis in December, coming in well below the 0.4 percent gain expected by economists. November’s sales were revised slightly higher to show a 0.6 percent increase.
The December reading was the weakest monthly performance since October, when sales fell 0.2 percent. November saw a strong 0.6 percent gain, but December’s flat reading suggests the momentum did not carry through the holiday season.
Excluding auto dealers, retail sales were unchanged in December. Stripping out both autos and gasoline, sales were also essentially flat.
Strong Actual Surge Masked by Seasonal Adjustments
While the seasonally adjusted figures showed weakness, the raw, unadjusted data painted a different picture. Retail sales actually surged 10.9 percent from November to December—stronger than the 8.8 percent jump seen in the same period a year earlier.
The disconnect reflects how seasonal adjustment factors, which are calibrated to historical shopping patterns, expected an even larger December surge. When the actual increase fell short of those heightened expectations, it translated to a flat reading on a seasonally adjusted basis.
For the full fourth quarter, total retail and food service sales reached $2.30 trillion on an unadjusted basis, up 3.1 percent from the same period in 2024. That represents decent, if unspectacular, growth.
On a year-over-year basis, unadjusted December sales rose 3.8 percent, with October up 3.5 percent and November up 1.9 percent. All three months posted positive annual growth.
Winners and Losers: Channel Shift Accelerates
The December figures revealed a continued shift away from traditional big-box retailers toward online shopping and specialty stores.
Department stores were essentially flat in December on a year-over-year unadjusted basis. General merchandise stores—a category that includes Walmart, Target, Costco and department stores—managed only 0.7 percent growth.
The December surge at department stores, measured month-over-month on an unadjusted basis, was also weaker than the prior year: 38.8 percent in 2025 versus 39.4 percent in 2024.
Meanwhile, consumers spent freely elsewhere. Nonstore retailers, primarily e-commerce, posted 6.7 percent year-over-year growth. Clothing and accessories rose 5.4 percent. Sporting goods, hobby, and book stores increased 8.7 percent. Food services and drinking places gained 4.5 percent.
On a seasonally adjusted basis, e-commerce showed particular volatility through the quarter. Online sales jumped 0.7 percent in October, held essentially flat in November, then gained just 0.1 percent in December.
Restaurants showed a similar pattern: down 0.1 percent in October, up 0.7 percent in November, then down 0.1 percent in December.
The Verdict: Decent but Unremarkable
The overall picture is one of decent but not extraordinary holiday sales, with the fourth quarter showing solid if unspectacular growth.
The 3.1 percent fourth-quarter gain suggests Americans remained willing to spend through the holidays. November provided most of the seasonally adjusted momentum for the quarter, while October and December both disappointed.
Traditional big-box retailers bore the brunt of weakness as shoppers migrated online and toward specialty stores and restaurants. The trend represents an acceleration of the structural shift in retail that has pressured department stores and general merchandisers for years.
While the December weakness in seasonally adjusted terms raised concerns, the strong unadjusted surge of 10.9 percent—beating last year’s 8.8 percent gain—indicates consumers did show up for holiday shopping, even if not quite to the degree seasonal models expected.
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