November retail sales surprise Wall Street

November retail sales posted surprise growth on Thursday, underscoring how the US consumer remains in better position than many have feared.

Retail sales grew 0.3% in November, according to Census Bureau data. Economists had expected a 0.1% decline. October retail sales had posted a 0.2% decline.

November sales excluding auto and gas increased 0.6% compared to estimates for a 0.2% decrease compiled by Bloomberg.

Eight of the 13 categories highlighted in the release saw increases from a month ago. Sales at food services and drinking places increased 1.6% while sporting goods picked up 1.3%. Meanwhile, sales at gasoline stations fell 2.9% while miscellaneous store retail sales dropped 2%.

The November report is the latest in a string of economic data that has surprised to the upside in a year that started with many predicting a recession. Still, November’s slim gains reflect a slowdown from what was a blowout summer of spending for American consumers.

“The strength in November followed a weak reading in October, so real consumption growth is still tracking lower in Q4 than in Q3,” Oxford Economics lead US economist Michael Pearce wrote in a research note on Thursday. “We expect a continued slowdown in the labor market and the drag from elevated interest rates to weigh on spending growth heading into 2024.”

One analyst, though, read Thursday’s report as a sign the Federal Reserve may not cut rates as quickly as markets anticipate.

“The resilience of the consumer provides credibility to the Fed achieving a soft landing but should also be a signal to markets that the Fed is not likely to cut rates as quickly and as much as the markets now have priced in,” Nationwide Chief Economist Kathy Bostjancic wrote in a research note on Thursday. “The stronger economic activity remains, the slower inflation declines, and the slower the Fed responds with rate cuts.”

In a press conference Wednesday, Federal Reserve Chair Jerome Powell acknowledged the risk.

Strong economic growth is “not itself a problem,” Powell said, noting that it only poses a dilemma if “it makes it difficult to achieve our goals.”

He explained that robust growth could keep the labor market strong and put upward pressure on inflation, making it harder to get to the Fed’s 2% inflation goal. That could mean rates stay higher for longer. It “could even mean we need to hike again,” he said.

Shoppers line up at the Nintendo Store during

Shoppers line up at the Nintendo Store during “Black Friday” in New York on November 24, 2023, the unofficial start of the holiday shopping season. (Photo by Yuki IWAMURA / AFP) (Photo by YUKI IWAMURA/AFP via Getty Images) (YUKI IWAMURA via Getty Images)

Josh Schafer is a reporter for Yahoo Finance.

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