Consumers increased their retail spending last month, providing a positive impact on the economy as the winter holiday shopping season kicks off. According to reports from the Commerce Department, retail sales saw a rise of 0.7% in November, surpassing October’s increase of 0.5%. A significant contributor to this growth was a 2.6% surge in auto sales. This demand in part stemmed from the need for new vehicles in regions impacted by Hurricane Helene in October, as well as attractive promotions from car dealerships. Additionally, many retail chains attracted shoppers with considerable discounts.
This uptick in consumer spending highlights the steady growth of the economy, despite the prevailing high-interest rates. Analysts suggest that this trend may cause the Federal Reserve to proceed more cautiously with future rate cuts than previously indicated. The Fed is scheduled to announce its latest interest rate decision on Wednesday.
However, there are signs of consumer hesitation, particularly as sales in grocery stores, clothing outlets, and restaurants saw declines. Excluding car dealers and online shops, the increases in sales were relatively modest. According to Tim Quinlan, an economist at Wells Fargo, the holiday sales season is expected to be decent for retailers. He notes that while growth may not be as spectacular as in previous years, ongoing consumer engagement suggests that market performance is unlikely to be overly weak.
The economy showed a robust expansion of nearly 3% annually during the July-September quarter, and some economists predict stable growth for the last quarter of the year. While there are indications of a slowing job market—where hiring has dipped since the start of the year—layoffs remain infrequent, and the current unemployment rate stands at a low 4.2%. Average wage growth across the nation is maintaining a solid 4% pace, which outstrips inflation and facilitates increased consumer spending.
Sales at furniture, electronics, and home and garden stores grew modestly. It’s worth noting that the retail sales figures are not adjusted for inflation, meaning that a portion of the observed increase can be attributed to rising prices. Sporting goods retailers also reported a 0.9% increase, while online sales flourished with a notable rise of 1.8%. Conversely, spending in restaurants and bars decreased by 0.4%, indicating a pullback among consumers in discretionary spending areas. Grocery store sales faced a slight dip of 0.2%.
The Federal Reserve is anticipated to implement a third interest rate cut this year, following a significant half-point reduction in September and a quarter-point cut last month. However, Fed officials, including Chair Jerome Powell, are expected to indicate a more measured approach to future rate reductions in the coming year, as they aim to keep rates significantly higher than pre-pandemic levels that affected loans and credit.
As retailers enhance promotions and deals to attract shoppers during the crucial pre-Christmas shopping rush, analysts predict a solid holiday season, though not as vigorous as last year’s, due to the prevailing high prices despite a recent easing in inflation. Retailers appear to have a good start to the unofficial holiday shopping kickoff, with many discounts beginning as early as October.
Adobe recently reported that the “Cyber Week,” spanning from Thanksgiving to Cyber Monday, generated $41.1 billion in online sales, marking an increase of 8.2% compared to the previous year. The expectations for total holiday sales from November 1 to December 31 are projected to reach $240.8 billion, signifying an 8.4% increase year-over-year. Additionally, Mastercard SpendingPulse has noted that sales on Black Friday, excluding automotive, rose by 3.4% from the previous year.
Given that there are five fewer days between Thanksgiving and Christmas this year, retailers are feeling increased pressure. Furthermore, the presidential election has diverted some attention from shopping, which led to a 9% drop in general merchandise sales during the two weeks ending November 9. Stores have started to see a rebound in sales, but there remains a need to recover those earlier losses. Significant shopping days are still ahead, with the top ten busiest shopping days accounting for approximately 30% to 40% of the total holiday retail traffic, as reported by Sensormatic Solutions. Six out of the ten busiest holiday shopping days are yet to come, including the day after Christmas.
At Easton Town Center in Columbus, Ohio, Spencer Jordan noted that foot traffic remains steady compared to last year, while sales are on the rise. Over the weekend, Newport Centre Mall in Jersey City, New Jersey, experienced bustling crowds, anchored by major retailers like Macy’s and Kohl’s that were offering substantial discounts.
Shoppers like Abraham Ferreyra, who purchased two coats on sale for just $15 each, indicated a need to tighten their budget for gifts this year. “We have a mortgage to pay,” he remarked. “So we can’t be giving too much.”