United States: Retail sales growth slows markedly in November on downswing in gasoline sales, but control group shows underlying strength
Retail sales grew 0.2% on a seasonally-adjusted month-on-month basis in November, slowing significantly from the upwardly revised 1.1% growth recorded in October (previously reported: +0.8% month-on-month), but nevertheless exceeding market expectations of 0.1%.
The print was mostly weighed on by a contraction in gasoline stations sales (November: -2.3% mom; October: +3.2% mom), mainly reflecting lower prices at the pump in November following the sharp oil price tumble recorded in the previous month—which took some time to feed through to retail prices. In addition, the reading suffered from a modest decline in clothing store sales, as well as food services and drinking places sales. Excluding gasoline stations and automobiles, retail sales rose 0.5% in November, down from a revised 0.7% in October (previously reported: +0.3% mom).
On the positive side, electronics sales were robust in the month, and health and personal care stores as well as furniture stores saw their sales sharply rebound. More importantly, sales growth for non-store retailers—a category which notably includes e-commerce business—surged in the month, from October’s already robust 0.8% increase to a very strong 2.3% rise in November. This, in addition to the significant upward revision to October’s data, signals strong momentum for consumer outlays in the run-up to the winter holidays, which should translate into robust private consumption growth in the fourth quarter. Indeed, core retail sales—which exclude automobile and gasoline, but also food and construction, and are used to estimate personal consumption expenditures in the GDP publications—were up a solid 0.9% in November, much stronger than the headline print and accelerating from October’s 0.7% uptick.
In annual terms, growth in retail sales slowed from a revised 4.8% in October (previously reported: +4.6% year-on-year) to 4.2% in November. It should also be noted that annual growth figures were weighed down by a high base effect, due to very robust holiday season sales last year. Lastly, annual average retail sales growth inched down to 5.2% in November, from 5.4% in October. Overall, although the headline reading was rather weak in the month, the core retail sales data shows the underlying robustness of consumer spending well into the holiday season. Commenting on the reading, Katherine Judge, economist at CIBC Capital Markets, noted:
“Rising incomes and lower gasoline prices are giving American shoppers more ammunition this holiday season […] today’s core figure leaves consumption in Q4 tracking higher than previously thought, and gives the Fed another reason to raise interest rates at its meeting next week. […] Although softer auto sales are expected to continue as the full effects of interest rate increases propagate through the economy, the fall in gasoline prices has left households with more income to spend on holiday purchases this year, something that will extend into December given further decreases in pump prices.”