Retail Sales Rise 0.3% in November
Americans showed a boost in spending in November, signaling positive momentum leading up to the crucial holiday shopping season. According to the Commerce Department, retail sales, a key measure of consumer spending on various everyday goods like cars, food, and gasoline, saw a 0.3% increase, surpassing the projected 0.1% decline by Refinitiv economists. This growth also outpaced the revised 0.2% drop recorded in October.
Strong Performance Excluding Gasoline and Autos
When excluding the more volatile categories of gasoline and autos, retail sales climbed even higher, with a 0.6% increase last month. However, it’s worth noting that these figures are not adjusted for inflation, which means consumers may be spending the same amount but getting less value for their money.
Positive Outlook despite Inflation Concerns
Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley, commented on the data, stating, “Today’s data suggests the U.S. economy, especially the consumer, is still chugging along.” Larkin also highlighted the potential risk of excessive economic growth reigniting inflation and forcing the Federal Reserve into a defensive position. Nonetheless, the current scenario suggests a “soft-ish” landing for now.
Discretionary Spending Remains Strong
Consumers continued to spend at various outlets, including grocery stores, car dealerships, health and personal stores, and restaurants and bars. This spending pattern indicates a positive trend in discretionary spending. Additionally, online shopping remained popular, with spending at non-store retailers increasing by 1% compared to the previous month.
Mixed Performance in Specific Retail Categories
While some sectors experienced growth, there were areas where consumers pulled back their spending. Gas stations, electronics and appliance stores, building material and garden stores, and miscellaneous retailers saw a decline in sales. General merchandise shops also experienced a drop in spending.
Factors Impacting Consumer Spending
The solid job market and significant wage increases have been instrumental in supporting consumer spending in recent months, despite high inflation. However, economists anticipate a potential shift in consumer behavior as student loan payments resume and high interest rates continue to affect the economy. Furthermore, more Americans are relying on credit cards to cover essential expenses. Credit card debt reached a new record in the third quarter, and delinquencies are on the rise.
Consumer Strength Amidst Economic Headwinds
Despite these challenges, the stronger-than-expected retail sales data suggests that consumers remain resilient, at least for now, in the face of various economic headwinds. Lydia Boussour, EY senior economist, noted that consumers are still willing to spend, albeit at a slower pace. Looking ahead, analysts anticipate a combination of cost fatigue, higher debt burdens, and tighter credit to potentially impact spending in the first half of 2024.