U.S. Retail Sales Beat Forecasts, Rising 0.7% in November on Strong Holiday Demand

U.S. Retail Sales Rise 0.7% in November, Beating Expectations

U.S. retail and food services sales rose by 0.7% in November, surpassing Wall Street estimates of 0.6% and reflecting a resilient American consumer heading into the holiday season. The data, released Tuesday by the U.S. Census Bureau, showed total sales climbing to $724.6 billion, seasonally adjusted. This marks a 3.8% increase year over year and indicates solid consumer demand despite lingering inflation concerns and high interest rates.

How Did Key Sectors Perform?

Retail trade sales climbed 0.9% in November compared to October and rose 4.1% from the previous year. Motor vehicle and parts dealers led the gains, surging 6.5% year over year, as robust demand for vehicles persisted despite higher borrowing costs. Nonstore retailers, which include e-commerce businesses, saw the strongest annual growth at 9.8%, showcasing the ongoing dominance of online shopping during the holiday season.

However, when excluding autos and gas, retail sales increased by a more modest 0.2% in November, falling short of analysts’ 0.4% expectations. The control group, which strips out several volatile categories and directly feeds into GDP calculations, grew 0.4%, aligning with consensus estimates.

October retail sales were also revised upward to a 0.5% increase from the initial 0.4%, signaling a slightly stronger start to the fourth quarter than previously reported.

Economic Resilience Amid Rate Pressures

The stronger-than-expected November sales highlight continued economic resilience as consumers remain willing to spend, particularly during the holiday shopping period. This positive data comes as the Federal Reserve prepares to release its latest Summary of Economic Projections and policy statement. Investors are closely watching for signals on interest rates and the Fed’s outlook on the U.S. economy, as recent data suggests economic strength may delay aggressive rate cuts.

Markets are currently pricing in a 97% chance of a 25-basis-point rate cut by the Fed on Wednesday, according to the CME FedWatch Tool. The robust retail sales figures may provide the Fed further reason to maintain its cautious stance, with inflationary pressures still a consideration.

What’s the Short-Term Market Outlook?

The strong November retail sales report reinforces a broadly bullish sentiment for the U.S. economy, as consumer spending remains a pillar of growth. Nonstore retailers and motor vehicle sales will likely continue driving gains through December as holiday spending peaks.

However, the moderate 0.2% gain excluding autos and gas suggests consumers remain selective in spending outside key categories. Traders should monitor how the Federal Reserve’s statements influence market expectations for rate cuts, as higher-for-longer rates could temper consumer momentum in early 2025. For now, solid spending trends suggest a supportive environment for retail-focused equities and consumer-related sectors.