Google News
US retail sales fell more than expected in November, according to data from the Commerce Department, but consumer spending remains supported by a strong labor market. The drop in retail sales, which was the largest decrease in 11 months, suggests that higher borrowing costs and the threat of an imminent recession are starting to impact household spending.
Retail sales fell 0.6% last month, the largest drop since December 2021, following an unrevised 1.3% jump in October. Online retail sales decreased 0.9%, while sales at food services and drinking places increased 0.9%. There were also decreases in receipts at general merchandise stores, sporting goods stores, hobby stores, musical instrument stores, and bookstores.
Despite the weakness in retail sales, the labor market remains strong, with initial claims for state unemployment benefits declining 20,000 to a seasonally adjusted 211,000 during the week ended December 10. This marks the largest decrease in claims since July and pushes them to a three-month low.
Businesses are generally reluctant to lay off workers, having struggled to find labor in the aftermath of the COVID-19 pandemic, according to Fed Chair Jerome Powell. Concerns about the economy The drop in retail sales is likely due in part to the fact that Americans started their holiday shopping early in October to take advantage of discounts offered by businesses trying to clear excess inventory.
However, the lack of follow-through into November suggests that consumers are being more cautious with their money amid recession fears and the draining effect of high inflation and sharply rising borrowing costs, according to Sal Guatieri, a senior economist at BMO Capital Markets.
“The lack of follow-through into November suggests consumers are being much more cautious with their money amid recession fears and the draining effect of overall high inflation and sharply rising borrowing costs,” said Sal Guatieri.
While the labor market remains tight and wages are elevated, concerns about the economy and rising borrowing costs may lead consumers to be more cautious with their spending. This could have implications for businesses, particularly those that rely on consumer spending to drive sales.
It could also have implications for the overall economy, as consumer spending accounts for a significant portion of economic activity. The data on retail sales and unemployment claims comes on the heels of the Federal Reserve's decision to hold interest rates steady.