US Retail Sales: Mixed, but for the most part disappointing - Wells Fargo

Daniel Fowler
December 14, 2019

US retail sales grew in November, but came in below consensus expectations.

Economists had projected an increase of 0.4% following an initially reported gain of 0.3% in October, which has now been revised up to show a rise of 0.4%.

Economists polled by Reuters had forecast retail sales would accelerate 0.5% in November. Last month's small increase in core retail sales could see economists lower their GDP growth estimates for the fourth quarter, which are now converging around a rate of 1.8%.

Retail sales edged up 0.2% last month, the government said Friday. -China trade tensions should aid the economy in 2020.

Excluding automobiles and gasoline, retail sales were little changed, following a 0.2% gain the previous month.

"Non-store", or online retailers like Amazon, performed better last month - climbing 0.8 percent for November, representing a 11.5 percent increase over October 2018. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 2.9% annualised rate in the third quarter.

The government reported last week that the economy created 266,000 jobs in November and the unemployment rate fell back to 3.5%, its lowest level in almost half a century. This should allow still-strong consumer fundamentals - healthy job and income growth and easy financial conditions - to continue to drive healthy spending over the next year.

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"As we have been asking, is this just noise or an early sign that cracks in the strong consumer story are starting to form?" said Michelle Girard, chief USA economist at NatWest Markets in Stamford, Connecticut.

Consumer spending grew at a 2.9 per cent annualized rate in the third quarter. Spending on services has been buoyant and should continue to give support to growth.

Growth estimates for the fourth quarter now range from as low as a 1.3 per cent rate to as high as a 2.0 per cent pace.

A China-U.S. trade deal that avoids tariffs on consumer goods should come as a welcome relief to U.S. retailers.

Stores such as Best Buy that sell electronics and appliances also posted a similarly strong increase.

A third report from the Labor Department on Friday showed imported inflation remained subdued in November. Gas station sales also picked up 0.7%, though that can reflect higher prices at the pump.

Last month, auto sales increased 0.5% after rising 1.0% in October.

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