Flat retail sales confirm slump in consumer sentiment

Economic Outlook - The U.S. economy is estimated to have expanded at an annual rate of 3.7% in the fourth quarter, according to the Federal Reserve Bank of Atlanta [3] - Fed officials forecast a gross national product growth of 2.3% for this year, following a 1.7% gain in 2025 [3] Interest Rate Policy - Policymakers have reduced the main interest rate three times in the final months of 2025 to support the labor market, despite inflation remaining above the 2% target [4] - Cleveland Fed President Beth Hammack noted a brightening economic outlook, with encouraging growth readings and a stabilized labor market [4] Consumer Spending and Retail Sales - Economic activity has rebounded strongly, supported by robust consumer spending and business investment, with third quarter real GDP growth estimated at 4.4% [5] - Retail sales were unexpectedly flat in December, indicating a downbeat mood among consumers, with declines reported in several retail categories [5] - The pace of spending growth in the second half of 2025 appears unsustainable due to slowing growth in real incomes and weakness in the labor market [5]