November retail sales posted surprising growth on Thursday, underscoring that the U.S. consumer remains in a better place than many feared.
According to the Census Bureau, retail sales rose 0.3% in November. Economists had expected a decline of 0.1%. October retail sales fell 0.2%.
November sales excluding cars and gasoline rose 0.6%, compared with Bloomberg estimates of a 0.2% decline.
Eight of the 13 categories highlighted in the press release saw increases compared to the previous month. Sales at restaurants and drinking establishments rose 1.6%, while sporting goods rose 1.3%. Meanwhile, gas station sales fell 2.9%, while other retail sales fell 2%.
The November report is the latest in a string of economic data that has surprised positively in a year when many began predicting a recession. Still, November's modest gains reflect a slowdown after a summer of busy spending for American consumers.
“Strength in November was followed by weakness in October, leaving real consumption growth in the fourth quarter still weaker than in the third quarter,” Michael Pearce, chief U.S. economist at Oxford Economics, wrote in a research note on Thursday. “We expect a continued slowdown in the labor market and the burden of elevated interest rates to weigh on spending growth through 2024.”
However, one analyst interpreted Thursday's report as a sign that the Federal Reserve may not cut interest rates as quickly as markets expect.
“Consumer resilience gives the Fed credibility for a soft landing, but should also be a signal to markets that the Fed is unlikely to cut interest rates as quickly or as sharply as markets have now priced in,” Nationwide said Chief Economist Kathy Bostjancic wrote in a research note on Thursday: “The stronger economic activity remains, the slower inflation falls and the slower the Fed responds with rate cuts.”
In a press conference on Wednesday, Federal Reserve Chairman Jerome Powell acknowledged the risk.
The story goes on
Strong economic growth is “not a problem in itself,” Powell said, noting that it only presents a dilemma when “it makes it difficult to achieve our goals.”
He explained that robust growth could keep the labor market strong and put upward pressure on inflation, making it harder to meet the Fed's 2% inflation target. That could mean interest rates stay higher for longer. It “might even mean we have to hike again,” he said.
Shoppers line up at the Nintendo Store during “Black Friday” in New York on November 24, 2023, the unofficial start of the holiday shopping season. (Photo by Yuki IWAMURA / AFP) (Photo by YUKI IWAMURA/AFP via Getty Images) (YUKI IWAMURA via Getty Images)
Josh Schafer is a reporter for Yahoo Finance.
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