The increasing strength of consumer spending is positive news for the U.S. economy. This increase in spending occurs despite rising consumer price inflation in recent months. Retail sales surged 0.6% for November, much more than economists expected. The reason for this increase is a testament to the robustness of our consumer base.
From September to November, consumer prices rose just 0.2%. Over the same time period, retail sales (adjusted for inflation) grew by 0.3%. Economists were expecting a smaller gain, with a 0.4% increase in retail sales predicted, according to FactSet. This recent increase is a marked departure from revised numbers for October, which reported a 0.1% drop in retail sales.
In November, the control group measure shot up by an astounding 0.4%. This measure, called core PCE, strips out the more topsy-turvy things, such as cars and gas. This was the opposite of what was expected, as economists were looking for a small decrease of 0.1% for this metric.
Digging in further by sector illustrates the uneven performance among different retailers. The largest slowdown in spending was at furniture stores, which had a 0.1% drop in November. Department stores didn’t do much better, landing a gut-wrenching 2.9% decrease in sales. Stores are adapting to the new landscape. Specialty shops did really well, experiencing a strong 1.9% increase in business. In contrast, gas stations were up a robust 1.4%. Home improvement stores played their part, with those stores posting a strong 1.3% gain in sales.
As we know, consumer spending is very important to the U.S. economy. About two-thirds of economic activity. Retail sales constitute a big part of this consumer expenditure, making them an accurate picture of the economic state.
That report was pushed back a month due to the recent government shutdown. This setback surely affected their ability to collect data and report it.