The 2016 holiday season might have been punishing for department stores, but the most recent retail sales figures shed more light on exactly where Americans are spending their money these days: cars, furniture and the internet.
"Spending in the final month of the year was a big goose egg, the weakest since July," said Lindsey Piegza, chief economist at Stifel Nicolaus & Co.
Overall retail sales came in 0.1 percent shy of expectations at 0.6 percent. Auto sales rose 2.4 percent, while analysts attributed a 2 percent increase in gasoline sales to rising prices at the pump. Absent those components, though, sales were flat.
Consumer optimism at the prospect of pro-growth Trump administration policies was still tempered by concerns over rising medical and housing costs, said Piegza. "At this point, most Americans are still feeling the pinch."
But despite these factors, some market observers saw reason for New Year cheer.
"I think the consumer is very strong. They were strong results, they saw strong demand and I think the trend is very promising," said Bridget Weishaar, senior equity analyst at Morningstar. "If you look at wage growth plus the potential of tax cuts and more infrastructure jobs, things look good going forward."
We Still Want a Good Price
Weishaar said it's a good sign that consumers are willing to sink money into the big-ticket categories that did well, like automotive and furniture sales, and she suggested that the flat sales and the increase in e-commerce reflected a consumer willing to spend, albeit carefully.
"You're seeing people still be very cautious about value. There was a lot of promotional activity in those channels," she said. "Value is still front and center in consumers' minds."
And we're increasingly seeking out those values on our computers and mobile devices.
"They believe they can get the best price online, they believe they can do better research online," said Brendan Witcher, principal analyst at Forrester Research. "Consumers know they can buy almost any product anywhere."
Optimism in the Economy
The big question prompted by Friday's report, though, is if we're buying less stuff or just paying less for it.
"We don't know how much of the softness there reflects pricing and how much of that reflects unit sales," said Sam Cotton, an economist at UBS, although he added that the strength in e-commerce suggested pricing softness.
This correlates with the results of a monthly survey by the National Association of Convenience Stores, which found that nearly six in 10 Americans say they're optimistic about the economy, even in the face of rising gas prices.
"That may just be confidence outrunning reality," Cotton said, although he added that this optimism might be enough, at least for the time being, to keep this economic momentum going.
"The savings rate is higher, there's space there. We have seen acceleration in wages," he pointed out. "Confidence is enough to pick things up for a little while."