Retail sales surprised to the upside in November as American consumers continued their robust spending.
The gloomy holiday spending forecasts now seem to be out of the conversation. Instead, our estimate of billions in excess savings left on American households’ balance sheets looks much more on point by the day, providing ample support for spending to grow steadily.
Sales increased by 0.3% on the month or by 5.9% on a three-month moving average annualized pace. The data echoed what the Federal Reserve signaled on Wednesday on the potential of a soft landing next year.
Simply put, America is not tipping toward a recession any time soon with such solid sales data, on top of many other stronger-than-expected economic indicators.
The underlying sales number—the control group—also picked up by more than expected with a 0.4% increase from a month ago, though October’s number was revised down.
On a three-month moving average annualized pace, the control group grew by 4.7% in November, enough to keep gross domestic product growing in the final quarter, as the group is often a proxy for consumer spending.
Read more of RSM’s insights on the economy and the middle market.
The sharp 2.9% drop in gasoline sales because of lower fuel prices was a major factor that enabled consumers to boost spending elsewhere. In a sense, it was the soft landing already working into real spending behavior.
Categories that posted the strongest gains were food services at 1.6%, non-store sales at 1.0% and sporting goods at 1.3%.
In contrast, sales of electronics dropped by 1.1%, building materials fell by 0.4% and department stores declined by 2.5%.
The takeaway
With inflation coming under control and income still solid, it is hard to make a case for any major drop-off in spending anytime soon.
We expect that next year will feature another period of sustained expansion that keeps sales at retail stores and online on a strong footing.
