WASHINGTON (Reuters) – U.S. retail sales rose more than expected in November, driven by an acceleration in auto purchases, in line with strong underlying momentum in the economy as the year draws to a close.
Retail sales rose 0.7% last month, following an upwardly revised 0.5% increase in October, the Commerce Department’s Census Bureau said Tuesday.
Economists polled by Reuters had forecast that retail sales, which consist mainly of goods and are not adjusted for inflation, would rise 0.5%, after a previously reported 0.4% increase in October.
Estimates ranged from a decline of 0.1% to a jump of 1.0%. The resilience of the labor market, characterized by historically low layoffs and strong wage growth, is supporting consumer spending and keeping economic expansion on track.
Strong household balance sheets, which reflect record stock market prices and high home prices, are also boosting spending.
Household savings remain supportive.
The solid increase in retail sales came despite a late Thanksgiving holiday that pushed Cyber Monday into December, and was consistent with a strong start to the holiday shopping season. It was also despite a less favorable seasonal factor, the model that the government uses to extract seasonal fluctuations from the data.
Federal Reserve officials were set to begin a two-day policy meeting on Tuesday and were expected to cut rates by 25 basis points on Wednesday, the third cut in borrowing costs since the US central bank began its easing cycle in September.
Strong retail sales contributed to warmer inflation data in recent months and suggested the Fed could suspend interest rate cuts in January. New President Donald Trump’s planned policies, including tariffs on imports and mass deportations of undocumented immigrants, are also seen as complicating matters for the central bank.
“Stubborn inflation above target will weigh on Fed decisions next year,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.
“But with rates set to put pressure on real after-tax incomes and undermine confidence, we think the commission will be more concerned about the labor market initially.”
The US central bank’s key overnight rate is currently between 4.50% and 4.75%, having been raised by 5.25 percentage points between March 2022 and July 2023.
Retail sales excluding cars, gasoline, building materials and food services rose 0.4% last month, following an unchanged decline of 0.1% in October. These so-called core retail sales, which most closely correspond to the consumer spending component of gross domestic product.
Consumer spending grew at an annual rate of 3.5% in the third quarter, accounting for most of the economy’s 2.8% growth rate in that period. The Atlanta Fed currently forecasts that GDP will rise 3.3% in the fourth quarter.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
