US retail sales increased more than expected in November, jumping 3.8% year-over-year and 0.7% month-over-month. The strong sales growth was driven by households purchasing motor vehicles and online merchandise, consistent with a healthy economy as the year ends.
The solid increase in retail sales came despite concerns about inflation and tariffs. Manufacturers’ output rose 0.2%, but the sector remains under pressure due to lingering effects from the Boeing strike and policy tightening.
Economists expect policymakers to signal fewer rate cuts in 2025, and some believe the Fed may pause rate cuts in January due to strong domestic demand. However, others warn that tariff-related price pressure will impact consumer spending in the new year.
Retail sales excluding automobiles, gasoline, building materials, and food services rose 0.4% last month, after a 0.1% dip in October. This core retail sales component corresponds closely with the consumer spending component of GDP and indicates strong household balance sheets are driving spending.
Despite pockets of weakness, including low-income households struggling with debt loads and declining dining out sales, consumers generally remain in good shape. Economists expect households to continue spending into the new year but warn that tariff-related price pressure will impact consumer spending pace in 2025.
The US dollar remained steady against a basket of currencies, while stocks on Wall Street traded lower. The Federal Reserve’s benchmark interest rate remains at 4.50%-4.75%, having been hiked by 5.25 percentage points between March 2022 and July 2023.
Source: https://www.reuters.com/markets/us/us-retail-sales-beat-expectations-november-2024-12-17