Key Points:
The Census’ monthly retail sales report is reported in nominal dollars, meaning the figures are not adjusted for inflation. Over the past few years, prices have increased significantly, especially in specific sub-categories. When these sub-categories are adjusted for goods-specific inflation, or “real retail sales,” new trends begin to emerge. After years of stagnation, real retail sales showed renewed strength over the last several months. But the fundamentals driving this growth appear short-lived and shifting spending patterns for some retail categories suggest an inflection point has arrived.
In this X-Factor, we’ll examine these changing spending patterns and their likely impact on retail commercial real estate (CRE).
Note: All charts containing real retail sales data are available as interactive visualizations which you can access by clicking here. In the interactive visualization, you can also explore other retail sales categories not discussed in this blog post, such as apparel and gasoline sales.
"Surging durable retail sales have recently driven headline real retail sales into positive growth territory, but this may be masking underlying weakness. The rise in nominal durable retail sales alongside increasing consumer debt suggests that the spending spree may have been pulled forward due to consumer uncertainty on price trends."
Headline Real Retail Sales Rebounded After Years of Stagnation
Beginning in mid-2020, real retail sales surged as people, eager to get out of their homes, started spending more. From mid-2020 to early 2022, real retail sales grew substantially on an annual basis, meaning that nominal retail spending outpaced the high inflation rates during that period. However, as people spent their quarantine savings, this trend reversed, and since April 2022, growth in real retail sales has mostly stagnated or declined.
But, in October 2024, annual growth in real retail sales turned positive again and has remained so for five consecutive months, the longest stretch of real retail sales growth since 2021. This increase was driven almost entirely by growth in nominal retail sales, since inflation has remained relatively stable over that period. Despite this resurgence, real retail sales growth has since decelerated and essentially flattened in February 2025, suggesting an inflection point and a potential shift from growth to stagnation or even contraction.
Real Retail Sales Growth Driven Primarily by Purchases of Durable Goods
Durable goods, such as vehicles, furniture, electronics, appliances, and building materials, are typically bigger-ticket items that are meant to last for several years. Purchases of durable goods have driven the majority of the increase in headline real retail sales over the past five months. In February, durables accounted for approximately 34 percent of all store-based retail sales1, highlighting their significant contribution to retail activity. Real retail sales of durables have been increasing almost continuously since December 2022. This growth was partly due to increasing nominal retail sales of durables and partly due to falling prices for durables, which began in early 2023 after the initial pandemic-era inflation shock drove durable goods inflation into double digits.
As a result, for most of the last two years, real durable retail sales have exceeded nominal durable retail sales, reflecting growing demand for durable goods as prices fell. However, starting in October 2024, nominal sales of durables increased markedly, possibly indicating that consumers began to pull consumption from the future in the face of rising price uncertainty. This consumer spending spree appears to be fading. If this deceleration continues, real durable retail sales will fall into negative territory, which would likely drag headline real retail sales along with it.
[1] Excludes non-store retailers.
Consumers are Using More Debt to Fund Purchases and Facing Higher Delinquency Rates
Growth in durable retail sales is being driven in part by growing consumer debt balances. While it’s true that annual wage growth has outpaced inflation in recent years, credit card and automobile debt balances have also been steadily increasing. As shown in the top portion of the following chart, credit card debt is at a 20-year high in nominal terms and close to a 20-year high in real, inflation-adjusted terms. The delinquency rate on credit card debt has also steadily increased since the end of 2022 and is currently at a level not seen since the aftermath of the Global Financial Crisis in 2011. Automobile loan debt, shown in the bottom portion of the chart, has also been steadily rising and is near a 20-year high in real terms2.
Automobile loan delinquencies are rising too. Taken together, the growing burden of consumer debt and increasing inability to service that debt is a warning sign that retail spending may soon cool. This is especially true of durables spending, as durables are often purchased using financing. For this reason, the five-month resurgence in real retail sales seems poised to fade.
[2] Here, auto loan debt is inflation adjusted using headline CPI rather than vehicle CPI because we want to know the real impact to consumers’ total spending power from growing debt balances, rather than spending power on automobiles only.
People Are Eating Out Less, Suggesting Increased Cost-Consciousness
In the immediate aftermath of the pandemic, there was notable growth in real retail sales for “experiential” categories – retail locations that require physical visits to purchase goods or services. One of the most significant increases was in real sales at restaurants and bars, which began in mid-2021 as people started dining out again. This trend continued until mid-2024. During this period, real sales at restaurants grew, while real sales of food purchased for home consumption declined, indicating that people were choosing to eat out rather than at home. However, this trend reversed in 2024. In March 2024, real sales growth for food at home turned positive for the first time in several years, and by June 2024, real retail sales growth at restaurants and bars stagnated. In February 2025, real retail sales at restaurants and bars turned sharply negative, and while one month’s data does not make a trend, the annual decline of 2.2 percent was the largest decline in real restaurant sales since January 2010.
This suggests that food spending patterns are shifting. While dining out was very popular post-pandemic, consumers now seem to be tightening their belts, eating out less, and eating at home more. This shift in demand is likely to increase foot traffic at grocery stores and shopping centers anchored by grocery stores, while restaurants may experience a decline in demand.
So, What’s the X-Factor?
Retail spending patterns are changing, indicating shifts in foot traffic and demand at various retail locations. Surging durable retail sales have recently driven headline real retail sales into positive growth territory, but this may be masking underlying weakness. The rise in nominal durable retail sales alongside increasing consumer debt suggests that the spending spree may have been pulled forward due to consumer uncertainty on price trends. Meanwhile, that debt is getting more difficult to service. And, while real retail sales are not declining for all experiential categories, demand for restaurants, which make up the largest experiential category, fell by the largest margin since 2010.
The economically all-important consumer may have made big ticket purchases ahead of the risk of price uncertainty and is eating at home more than before, suggesting lower overall levels of real spending at restaurants, but more trips to the grocery store.