Retail Sales Get No Help From Surging Credit Card Debt

Retail sales unexpectedly stalled at the end of the year, raising questions about the strength of the American consumer.

In the past years, household consumption has been a vital engine of growth. Even as inflation squeezed budgets and confidence surveys turned gloomy, people kept spending.

That's precisely why the latest data felt different. Not a collapse, but a clear break from the steady upward trend that defined most of the year.

Year-End Slowdown

The Commerce Department reported that retail sales were flat in December compared with November. Economists had expected a modest gain of about 0.4%, especially during the holiday shopping season. Instead, spending didn't move at all.

November had delivered a solid 0.6% increase, while earlier in the summer, there were even stronger gains, including a 1% jump in June. The last few months had already hinted at cooling momentum, with October slipping slightly and September barely growing.

The details suggest that shoppers were becoming more selective. Sales fell at furniture stores, electronics retailers, and restaurants. Meanwhile, necessity-driven categories such as building materials, gas stations, and food stores held up better. That kind of split often points to a consumer who is still spending, but focusing more on essentials than on discretionary purchases.

Consumer confidence helps explain that shift. Sentiment has been deteriorating for months and recently fell to its lowest level in more than a decade. For much of the year, there was a disconnect between what people said and what they did. Surveys showed rising pessimism, yet spending numbers kept coming in strong, as experts pointed out.

"Consumer spending has finally caught up with consumer sentiment, and not in a good way," Chris Zaccarelli, chief investment officer at Northlight Asset Management, said, according to AP.

Only Up For Debt

While retail activity flattened, another part of the consumer story kept moving higher. A report from the New York Fed showed total household debt rising by $191 billion to $18.8 trillion in Q4 2025. Credit card balances alone jumped by $44 billion in that period, reaching around $1.28 trillion, up more than 7% from the previous year.

Meanwhile, mortgage balances rose by $98 billion to $13.17 trillion. Auto loans rose by $12 billion to $1.67 trillion. Student loan balances increased by $11 billion to $1.66 trillion, while home equity lines of credit also expanded. Overall, non-housing debt rose by $81 billion during the quarter.

"As household debt levels grow modestly, mortgage delinquencies continue to increase," said Wilbert van der Klaauw, the Fed's economic research advisor.

About 4.8% of all outstanding debt was in some stage of delinquency, and serious delinquencies ticked higher for credit cards, mortgages, and student loans. Student debt stood out as the most troubled segment, with nearly 10% of balances more than 90 days overdue.

For Matt Schulz, chief credit analyst at LendingTree, the rise in credit card debt is obvious."Stubborn inflation has shrunk a lot of Americans' financial margin for error from slim to about none, forcing people to lean more heavily on credit card debt," he said, according to CNBC, adding that new records are likely in the months ahead.

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