Broker Check

Online Sales Skyrocket As Consumers Keep Spending

| January 18, 2024

Online Sales Skyrocket As Consumers Keep Spending

Dr. Jeffrey Roach | Chief Economist

Last Updated: 

Key Takeaways  

Not accounting for inflation, December online sales rose 9.7% from a year ago as consumers focused their attention on non-store shopping.  

Restaurant spending grew by over 11% from last year as consumers seem unfazed with higher restaurant prices. However, spending was roughly unchanged from last month. 

Excluding auto sales, retail spending was up 0.4% month-over-month on a nominal basis. Adjusting for inflation, sales ex-autos rose 0.1%. 

Consumers shunned brick-and-mortar stores in favor of online shopping. The behavioral change that happened during the pandemic will likely persist and successful retailers will adjust to this new model. 

Bottom Line: The strength in consumer spending tamped down investors’ expectations of a rate cut in March but still, markets are pricing over a 50% chance of a cut. This morning’s report does not include most of the services sector, so investors must wait until later this month when the comprehensive spending report is released. 

Consumers Enjoyed the Holidays 

Analysis from Mastercard showed that holiday spending (Nov 1–Dec 24) excluding autos was roughly 3.1% higher than last year. Perhaps they weren’t too far off. This morning, the Census Bureau released retail sales for December, which obviously includes the last week of December omitted in Mastercard’s estimates. Raw data from the Census Bureau showed annual sales were up 3.5% during the last two months of the year.

Shutdowns Accelerated Use of E-Commerce

The Shift to Online Sales is Sticking

Line graph depicting online retail sales from December 2016 to December 2023 in billions, as described in the preceding paragraph.
Source: LPL Research, U.S. Census Bureau 01/17/24

“Just Google It”

When today’s students have a research project, the process probably includes using a web-based search engine to find information. Similarly, when today’s consumers go shopping, they don’t always set foot in a brick-and-mortar store but check their options with online retailers. Since the pandemic, consumers have accelerated their acceptance of online shopping, and we don’t expect things to change.  

December sales for online shopping rose over 11% from a year ago and have stayed elevated for several months.  

Consumers Shunning Brick-and-Mortar Retailers

Bargain-Hunters Choose Online

Line graph depicting change in consumer spending in nonstores versus department stores from Dec. 2021 to Dec. 2023, as described in preceding paragraph.
Source: LPL Research, U.S. Census Bureau 01/17/24

Summary 

What should investors take away from this? We saw that holiday sales were not as strong as predicted; however, the slowdown in consumer activity is muted and indicative of the soft landing the Federal Reserve (Fed) hopes to achieve. 

Markets are taking comfort that amid a slowdown, the Fed is transitioning from rate hikes to rate cuts this year. If rates can dip low enough and soon enough while the labor market remains stable, the economy could successfully handle the headwinds from rising debt, weaker international markets, and the unknown ripple effects from commercial real estate. 

Research Bio Headshot

Dr. Jeffrey Roach


Jeffrey Roach guides the overall view of the economy for LPL Financial Research and has over 20 years of experience in investing and economics.