United States: Retail Sales Rise Again

The October dip in sales didn’t last long. Although there had been some warning signs, growth in November turned out to be surprisingly robust. That means total retail sales grew in seven of the last eight months, with October being the exception. If we exclude motor vehicles and gasoline, there have been no month-on-month sales declines since March.

The auto industry’s resilience in November was particularly surprising since the number of new purchases was down 0.7% according to data released earlier this month. It looks like this is due to an increase in purchases of higher-end vehicles that pushed up the value of new vehicles sold, despite the drop in number and a 0.1% drop in the price of new vehicles according to the consumer price index. Other sales categories also surprised to the upside. These include leisure goods and food services, for which preliminary card transaction data had suggested declines. The loss of 38,400 retail sales jobs in November had been another gloomy sign.

It seems that US consumers are still spending even though they feel ambivalent about the economy. Even the most discretionary purchases (leisure, food services, etc.) are still on the rise. It remains to be seen whether consumers can keep up this pace for the rest of the holiday season and beyond. It's hard to believe that high interest rates, low confidence (despite an improvement in December) and the depletion of excess savings won't eventually dampen real spending. In the meantime, it should keep growing in the fourth quarter of 2023, although not as much as the annualized increase of 3.6% seen in the third quarter.

US consumers continue to spend more despite the challenges they face. But we expect them to start tightening their belts eventually. That would help to further ease inflationary pressures and reassure the Fed that it made the right decision to pause rate hikes and start thinking about loosening monetary policy.