Retail spending in November rose $1.6 billion to $639.8 billion for the month – up 0.3 percent from the previous month and up 18.2 percent from a year earlier. This modest uptick was below expectations and suggests that rising prices are curbing consumer spending power. Indeed, adjusted for inflation, sales were down 0.5 percent month-over-month – meaning that November’s sales increases were due to rising prices not volumes. Further weakness may lurk ahead as new cases of COVID-19 continue to rise and sustained inflationary pressures continue to weigh on consumers.

In-person services were the primary driver of consumer demand in November. Spending at food services and drinking places rose 1.0 percent from a month earlier. Pent-up demand for these in-person services has helped them rebound during lulls in the pandemic. However, a burgeoning ‘winter wave’ of COVID-19 paired with the emergence of the new Omicron variant could hurt spending in this category over the coming months.

Spending on goods also expanded in November, but more modestly. While spending on motor vehicles and parts fell 0.1 percent from October, excluding this category retail sales rose 0.3 percent month-over-month. Retail control, which excludes motor vehicles, gasoline, and building supplies was down 0.1 percent from the previous month. Spending at food & beverage stores and at gasoline stations were the strongest categories for the month and coincide with recent jumps in food and energy prices. Sales at non-store retailers were flat in November, but could see a resurgence over the winter period if consumers become worried about the pandemic once again.

Looking ahead, there is reason to be apprehensive about retail sales over the winter period. High inflation rates are unlikely to dissipate and will continue to erode consumer spending power. Furthermore, a new wave of COVID-19 infections will likely intensify just as a new variant introduces additional uncertainty.