WASHINGTON (Reuters) – U.S. retail sales rose more than expected in November amid an acceleration in auto purchases consistent with strong momentum in the economy as the year draws to a close.
The Commerce Department’s Census Bureau said on Tuesday that retail sales jumped 0.7% last month after an upwardly revised 0.5% increase in October.
Economists polled by Reuters had expected retail sales, which are mostly goods and not adjusted for inflation, to rise 0.5 percent after rising 0.4 percent in October.
Estimates ranged from a decline of 0.1% to a jump of 1.0%. Labor market flexibility, characterized by historically low layoffs and strong wage growth, supports consumer spending and keeps the economic expansion on track.
Strong household balance sheets, reflecting record stock market prices and rising home prices, are also driving spending.
Household savings remain supportive.
The strong increase in retail sales came despite the delayed Thanksgiving holiday that pushed Cyber Monday into December, and was consistent with a strong start to the holiday shopping season. This was also despite the presence of a less favorable seasonality factor, which is the model the government uses to remove seasonal fluctuations from the data.
Federal Reserve officials are scheduled to begin a two-day policy meeting on Tuesday and are expected to cut interest 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 have added to warmer inflation readings in recent months, suggesting the Federal Reserve may pause interest rate cuts in January. Planned policies of President-elect Donald Trump’s incoming administration, including import tariffs and mass deportations of illegal immigrants, are also seen as complicating matters for the central bank.
“Stable and above-target inflation will influence the Fed’s decisions next year,” said Oliver Allen, chief US economist at Pantheon Macroeconomics.
“But with tariffs putting pressure on real after-tax income and undermining confidence, we think the committee will initially be more concerned about the labor market.”
The US central bank’s benchmark overnight interest rate currently lies in a range of 4.50%-4.75%, having been raised by 5.25 percentage points between March 2022 and July 2023.
Retail sales excluding automobiles, gasoline, building materials and food services rose 0.4% last month after an unrevised 0.1% decline in October. These are called core retail sales, which closely correspond to the consumer spending component of GDP.
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