Here’s where consumers spent less money in November as retail sales sank

Retail sales fell sharply in November despite reports of record-breaking Black Friday sales, according to data released Thursday by the Census Bureau.

Retailers and restaurants saw sales fall 0.6 percent between October and November, according to the new data, marring what is normally a strong month for the sector and a crucial source of strength for the U.S. economy. 

November’s decrease followed a strong 1.3 percent gain in retail sales in October, so it’s possible some holiday shopping typically slated for last month happened even earlier. But steep drops in sales across several major categories could be a sign that U.S. consumers are finally reaching their breaking points with inflation.

“US households are feeling increasingly uneasy about having to drain their savings and using their credit cards to make up for the lost spending power and cover their purchases,” wrote Gregory Daco and Lydia Boussour, economists at consulting firm EY-Parthenon, in a Thursday analysis.

Here are the areas where consumers pulled back their spending the most.

Department stores

Iconic department stores have taken a hit over the past decade thanks to the rise of online shopping and the demise of the U.S. shopping mall. Black Friday did little to soften the blow.

Sales at department stores fell 2.9 percent from October, the most of any retail subsector tracked by the Census Bureau. Department store sales are also down 3 percent over the past 12 months.

Consumer demand for large appliances, electronics, furniture, and other department store staples has fallen off after a rush of interest earlier in the pandemic, when homebound shoppers used their spare money on upgrading their living spaces. The combination of intense consumer demand and supply chain disruptions have also pushed prices for many of those items much higher than what customers can stomach.

“Households are increasingly relying on their savings to sustain their spending, and many families are resorting to credit to offset the burden of high prices. These trends are unsustainable,” Daco and Boussour wrote.

Furniture and home furnishings

The supply chain snarls and shipping backlogs that kept untold couches and dining room tables from reaching their new homes during the pandemic are finally easing. But higher prices driven by those delays and diminishing consumer interest in new furniture is taking a toll on the stores that sell it.

Sales at furniture stores fell 2.6 percent in November and are down 3.2 percent on the year. That trend may keep up well into next year with high inflation weighing on household budgets and steep decline in home sales sapping some of the need for new furniture.

“Some of the decrease … may be attributable to lower prices for certain goods as overstocked inventories put pressure on retailers to discount to move products,” wrote Kayla Bruun, economic analyst at Morning Consult, in a Thursday analysis.

“However, household budgetary concerns are also likely playing a role, as the continuing gap between inflation and income growth puts a strain on consumer purchasing power.”

Building materials and garden equipment

Home Depot, Lowe’s and other major U.S. hardware and building supply stores saw sales explode when Americans were still hunkered down earlier in the pandemic. Surging home sales drove up the need both for construction materials to build and furnish homes, while some homeowners opted to pour their stimulus money into renovations.

But the steep slowdown in the housing market driven by higher interest rates has taken the steam out of housing construction and renovation, leading to a 2.6 percent drop last month and 3.2 percent drop in sales for building and garden supply stores.

The decline “is not a surprise given the slump in housing activity,” Daco and Boussour explained.

Autos and auto parts

Prices for cars and trucks finally began to fall this year after spiking soon after the arrival of the COVID-19 pandemic. Those price declines may be eating away at auto dealer’s profits, all while inflation gives Americans less room to afford repairs and upgrades.

Auto dealers saw sales drop 2.6 percent in November and are up just 0.5 percent on the year. Including auto parts stores, the sector lost 2.3 percent in sales from October. Experts said the drop was expected after previous data showed a drop in automobile purchases.

“We knew that autos … were going to be a drag given lower unit sales released at the start of the month,” said James Knightley, ING’s chief international economist, in a Thursday analysis.

Electronics and appliances 

Electronics and appliance stores are another early pandemic winner who has fared much worse in 2022. The rush to purchase new TVs, computers, video game consoles and other lockdown staples has faded, all while rising prices for food and — until recently — gasoline ate away from disposable income.

“Big-ticket purchases look especially shaky,” said Ted Rossman, senior industry analyst at Bankrate.

Online retailers

Black Friday seemed like easy money for mega online retailers, particularly as a growing number of big box stores opted to stay closed the day after Thanksgiving. Private sector data reported record-breaking sales throughout the weekend, which seemed like a sign of consumer resilience amid high inflation.

But federal data paints a much different picture.

Nonstore retailers saw sales fall 0.9 percent last month, even as they still saw sales rise 7.7 percent over the past year.

The November dropoff could be driven in part by an October Amazon Prime Day sales event, which could have prompted many Americans to take care of the holiday shopping early. 

Experts also pinned the decline on retailers needing to slash prices in order to clear building inventories of goods that are out of favor with shoppers—some of which were delivered much later than ordered due to supply chain snarls.

“Consumers are very hesitant to pay full price this year,” Rossman said. “Excess inventories and changing consumer preferences are proving to be a tough combination.”

Updated at 4:12 p.m.