People make their way through New York's Herald Square holding shopping bags in December.ANGELA WEISS/AFP/Getty Images
U.S. retail sales increased more than expected in November as motor vehicle purchases rebounded and households increased spending elsewhere, pointing to solid economic growth in the fourth quarter.
Retail sales rose 0.6 per cent after a downwardly revised 0.1 per cent drop in October, the Commerce Department’s Census Bureau on Wednesday. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, advancing 0.4 per cent after being unchanged as previously reported.
The Census Bureau is catching up on data releases after delays caused by the 43-day government shutdown. Spending is largely driven by higher-income households, with lower-income consumers struggling to cope with the rise in the cost of living.
The government reported on Tuesday that food prices increased by the most in over three years in December, even as overall inflation was moderate.
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Bank of America Securities said its Consumer Prism showed “the gap between higher- and lower-income spending growth was substantial and persistent through the fourth quarter.” It noted that the divergence between the two income cohorts started in late 2024 and widened over the course of last year, adding that the “K-shape” in spending “is more evident in discretionary than non-discretionary spending.”
President Donald Trump, whose aggressive trade policy has been blamed by economists for higher prices, has made a flurry of proposals to lower the cost of living, including buying US$200-billion in mortgage bonds and a 10-per-cent cap on credit card interest rates for a year.
Banks and financial institutions warned the proposal would limit access to credit. Economists and policy-makers argued that lack of supply was making housing unaffordable. Retail sales excluding automobiles, gasoline, building materials and food services increased 0.4 per cent in November after a downwardly revised 0.6-per-cent gain in October.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have shot up 0.8 per cent in October.
Consumer spending increased at a brisk pace in the third quarter, driving much of the economy’s 4.3-per-cent annualized growth pace during that period. The Atlanta Federal Reserve is currently forecasting GDP increased at a 5.1-per-cent rate in the fourth quarter.