U.S. Retail Sales Flat in December; 2026 Consumer Spending Outlook Cautious

January 01, 2026 — U.S. retail sales were flat in December, signaling a potential slowdown in consumer spending in 2026 as a weaker labor market and expectations of a less robust stock market weigh on households. Consumer spending, which accounts for about two-thirds of economic activity, is closely watched because it drives corporate profits, stock prices, and monetary policy. Senior economist Scott Hoyt of Moody’s Analytics said the wealth effect that supported spending in recent months is beginning to erode. The S&P 500 gained 16% in 2025, but a potential flattening in 2026 could dampen confidence among higher-income consumers. The Census Bureau’s report, lower than economists’ 0.3% forecast, follows a strong November and suggests the pullback may already be underway. Economists project a softening in 2026, citing slower real disposable personal income growth, a softening labor market, and declining saving rates. However, Wells Fargo economists note a weak end is not necessarily the start of a new trend; households are still spending amid inflation and a moderating jobs market.