Consumer Spending Trends Amid Weather Challenges

For some time, it appeared American consumers had become less enthusiastic about spending.

Retail sales were stagnant in December, even with the usual holiday shopping spirit. Categories like clothing, furniture, and restaurants saw a dip in consumer spending throughout the month.

Then a major winter storm hit.

The last week of January brought the coldest temperatures since 1995 and the heaviest snowfall in six decades, as per the analysis from retail weather expert Planalytics. Visits to shopping malls dropped significantly, with estimates indicating a nearly 13% decline in foot traffic at outlet centers compared to last year. Apparel stores experienced an over 8% drop in visits.

This raises a pivotal question for both local retailers and Wall Street: has the weather temporarily stalled consumer spending, or does it suggest a deeper, ongoing decline in demand?

The answer varies depending on the perspective.

On a brighter note, retail foot traffic rebounded by early February after a steep drop in late January. Indoor malls welcomed over a 7% increase in visits, while outdoor shopping areas noted nearly an 8% rise, according to foot traffic data from Placer.ai.

Moreover, a report from the Bank of America Research Institute revealed a positive development: despite winter weather challenges, “total credit card spending per household increased 2.6% year-on-year” in January, marking the quickest growth in almost two years.

Additionally, bank data suggested that the spending decline related to the winter storm was particularly felt in the South, Lower Midwest, and Northeast.

Yet, weather isn’t the only factor influencing consumer confidence this winter.

A Rising Disparity

The Bank of America report serves as a reminder of a troubling trend: higher-income earners are largely fueling consumer spending.

“We worry that a ‘K’-shaped divide is widening between high-income and middle-income households, compounded by existing inequalities with lower-income groups,” noted David Michael Tinsley, a senior economist at the institute.

Ted Rothman, a principal analyst at Bankrate, added that spending from affluent households obscures the cuts affecting those lower down the income scale.

“The cumulative effects of inflation and rising interest rates are pushing many low- and moderate-income households into a tighter financial corner,” he remarked in an email to NBC News.

While overall inflation has slowed, essential categories like food and housing continue to present affordability challenges for many households.

The prolonged cold weather usually results in higher utility bills. January utility costs saw a significant increase, rising by 9.8% compared to last year, adding to the financial strain.

The January jobs report showed contrasting signals. While employment numbers surpassed expectations, job gains were mainly seen in two sectors: aged care and construction.

This paints a picture where, even though the economy appears stable, there are underlying risks to watch out for.

This shaky foundation makes the upcoming weeks a critical indicator of the broader consumer landscape.

Upcoming Spending Opportunities

First up is Valentine’s Day. The National Retail Federation anticipates record spending, predicting a total of $29.1 billion for this occasion.

This holiday weekend also includes President’s Day, often known for significant sales and promotions. Many retailers cut prices either during the holiday season or to clear out leftover stock from previous years.

Shoppers can generally find great deals on big-ticket items like appliances, furniture, and electronics during this time.

Tax refunds are also starting to arrive. These can represent a substantial influx of cash for many households each year.

This year, refunds could be significantly higher than in the past, thanks to legislation passed in 2025.

Bank of America estimates this year’s refunds could be 25% larger than last year’s.

The big question remains: how will Americans choose to use this money?

“Some of these funds will likely be used promptly to alleviate financial pressures, particularly for low- and moderate-income households,” said economists at the Bank of America Institute in a report released Friday.

“However, not all of the refund will be spent immediately. Typically, a considerable portion goes into savings,” they added.

The bank noted a consistent seasonal trend where savings generally see an uptick in spring as bonuses and tax refunds enter bank accounts, followed by a decline later in the year.

As such, this year’s higher tax refunds could contribute to increased saving for a while.

Some individuals might also opt to spend more of their refunds upfront, given the larger cash influx.

It’s true that January saw a slowdown in shopping, but the weeks ahead will be telling in terms of whether consumers feel confident enough to prioritize present expenditures or save for the future.