US consumers reopened their wallets and dusted off their credit cards last month as retail sales increased by a stronger-than-forecast 0.3%. In fact, November's rise, following October's 0.2% fall, surprised most economists who had predicted another slide of 0.1%.
The headline rise was not the only strength of the month's sales performance, as spending on petrol fell 2.9%. Excluding petrol, retail sales surged even more, with a 0.6% increase, thanks to the positive impact of Black Friday sales.
Retail sales, excluding building materials, cars, and petrol (a component that influences consumer spending in the GDP report), rose by 0.4%, rebounding from October's flat performance.
US consumers increased their spending at bars, restaurants (+1.6%), sporting goods and bookshops (+1.3%), and online retailers (+1%), but not at department stores (-2.5%), miscellaneous store retailers (-2%), and electronics and appliance shops (-1%).
Even when factoring in inflation, US consumers are doing well. With the consumer price index up 0.1% in November, the 0.3% rise in retail sales indicates that consumers are keeping up with price increases. On a year-over-year basis, sales accelerated by 4.1%, compared to a headline CPI rate of 3.1%, although inflation remains above the Federal Reserve's 2% target but well below its peak of over 9% in June 2022.
"The rebound in retail sales in November provides further illustration that the continued rapid decline in inflation is not coming at the cost of significantly weaker economic growth," said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
Bill Adams, chief economist at Comerica, noted, "The big picture is that American consumers continue to spend and sustain the economic expansion," while EY senior economist Lydia Boussour mentioned, "The latest data points to solid but slower spending activity so far in Q4."
The sharp rebound in sales had no significant impact on market sentiment. US 10-year Treasury bond yields fell to under 4%, gold and oil rose as euphoria about 'rate cut looms' continued, albeit at a less frenetic pace for shares.
In addition, initial claims for unemployment insurance totaled a seasonally adjusted 202,000, lower than the estimated 220,000 and down 19,000 from the previous week, marking the lowest weekly figure in nearly two months.
