December Retail Sales Rise 0.4% as Jobless Claims Hit 217K, Signaling Mixed Outlook

Retail Sales Increase 0.4% in December

Advance estimates for U.S. retail and food services sales in December 2024 showed a 0.4% monthly increase, totaling $729.2 billion. While slightly below the 0.5% core estimate, retail trade sales aligned with expectations, rising 0.6% from November. On a year-over-year basis, sales climbed 3.9% compared to December 2023.

For the entirety of 2024, retail sales rose 3.0% over 2023, reflecting steady consumer activity despite inflationary pressures. Notably, sales for the October to December period were up 3.7% from the same period in 2023, indicating strong holiday spending. November sales growth was revised upward to 0.8%, providing a stronger base for December’s performance.

Key Sectors Outperform Expectations

The automotive sector led December gains, with motor vehicle and parts dealers reporting an 8.4% increase from the previous year. Nonstore retailers, a category dominated by e-commerce, rose 6.0% year-over-year, benefiting from continued online shopping trends.

In contrast, some traditional retail categories posted more modest growth, reflecting potential consumer sensitivity to pricing pressures. Seasonal adjustments for holiday demand and trading-day differences were also factors influencing the December figures.

Labor Market Data Adds Mixed Signals

Initial unemployment claims for the week ending January 11 rose by 14,000 to 217,000, exceeding the consensus estimate of 210,000. The 4-week moving average dipped slightly to 212,750, signaling relative stability in the labor market. Insured unemployment remained at 1.2%, unchanged from the prior week, while the total insured unemployment count declined modestly by 18,000 to 1,859,000.

Revised figures for previous weeks showed marginal increases in claims data, underscoring slight upward adjustments to prior labor market estimates.

Market Forecast: Cautious Optimism for Retail

The December retail sales report suggests continued resilience in consumer spending, with strength in key sectors like automotive and e-commerce. However, the slight miss on core estimates and the uptick in unemployment claims warrant cautious optimism.

Short-term market sentiment may remain neutral to mildly bullish, driven by robust year-over-year growth and upward revisions to prior data. Traders should monitor upcoming economic indicators for additional clarity on consumer strength and broader market trends.