Retail sales rose 0.7% in November compared to October, to $720 billion, seasonally adjusted, and October was revised upwards (blue in the chart below), so look at the three-month average (in red in the chart), which removes month-to-month zigzag lines and includes revisions, jumping 0.7% as well.
November’s sales increase and the average annual three-month increase in sales were +8.6%! And it wasn’t just November, or the last three months. The wave of spending began in July.
Retail sales accelerated sharply from month to month, starting in July. It’s like someone who opened the water tap in July Our drunken sailors, as we called them lovingly and sarcastically, are in the mood to spend, thanks to wage increases that have surpassed inflation over the past two years, an abundance of cash in money-market funds and certificates of deposit that still generate more than 4% interest, as well as massive gains from their holdings of stocks, cryptocurrencies, and house prices.
And otherwise, while their credit burden is historically low and their credit is in fairly excellent condition, even on their credit cards except for a small sub-segment of accounts with low credit ratings.
Most migrants work as soon as they get a job, spending money, although they generally don’t spend much. This expenditure by such a large new population contributes to this sharp increase in demand.
Retail sales by category
The biggest driver of this growth was the two largest retail categories: new and used vehicle sales and e-commerce, which together accounted for 36% of total retail sales.
We have already seen that retail sales of new cars in November, in terms of the number of vehicles delivered to retail customers, jumped 10% year-on-year.
Market Reaction to U.S. Core Retail Sales monthly
Core retail sales data, which excludes volatile categories such as automobiles, gasoline and building materials, provides a clearer picture of consumer demand and spending trends. Stability in the previous month’s figures indicates a cautious consumer base, posing challenges and opportunities for the broader economy.
The fallout from core retail sales data reverberates deeply within financial markets. Overall, a stronger-than-expected reading points to a healthy consumer sector, likely leading to upward revisions to the economic growth outlook and possibly prompting the Fed to reconsider its stance on monetary policy.
Conversely, failure to meet expectations raises concerns about consumer sentiment, especially as inflationary pressures continue to weigh on household budgets. The current reading of 0.2% serves as a reminder that despite positive signs in other economic indicators, consumer spending remains tepid – a factor that could weigh on GDP growth estimates.
Market participants responded to the news with a mixture of caution and optimism. On the one hand, equities showed resilience, suggesting that investors continue to rely on a strong economic recovery led by various sectors.
On the other hand, the disappointing retail sales figure may lead to a reassessment of growth expectations, especially in sectors that rely on consumer spending. The bond market also felt the ripple effects, as traders adjusted their positions in anticipation of how the Fed would respond to weaker data.
A lower-than-expected core retail sales figure may lead to a more dovish stance from the Fed, which could keep interest rates low for longer, which may be welcomed by consumers and investors.
US Core Retail Sales Forecast monthly
Looking ahead to next month, analysts are closely watching the factors that may affect core retail sales. Various economic indicators, including job growth, wage increases, and consumer confidence indicators, will play crucial roles in shaping expectations.
As inflation pressures continue, many consumers are likely to remain cautious, which could limit spending. However, seasonal factors, such as holiday shopping and year-end promotions, may also inject some enthusiasm into the Patterns of consumer spending. The outlook for next month is 0.4%, suggesting an upbeat rebound that will be more closely aligned with market expectations.
The upcoming core retail sales data will be pivotal, not only to immediate market reactions but also to shape the broader economic narrative as we enter a new year. Investors and policymakers alike will closely monitor consumer spending habits, especially because the retail sector often serves as an indicator of overall economic health.
If the next report reflects stronger-than-expected performance, it could boost confidence in the economic recovery and lead to upward revisions to growth expectations. Conversely, another disappointing outcome could lead to more scrutiny of consumer sentiment and spending behavior, forcing the Fed to adopt a more accommodative stance on monetary policy to stimulate growth.
The core retail sales report is a critical indicator of economic health in the United States. With the latest reading of 0.2% indicating a slump in consumer spending, markets responded with cautious optimism as they assessed the fallout from the data.
Looking ahead, expectations of 0.4% growth next month point to a possible recovery in consumer spending, depending on various economic factors. As financial markets continue to navigate these uncertain waters, a focus on core retail sales will remain critical to understanding the broader economic landscape.
