WASHINGTON — Consumers increased their spending at retail stores last month, boosting the economy in the early stages of the winter holiday shopping season.
Retail sales rose 0.7% in November, the Commerce Department said Tuesday, a solid increase that exceeded October’s 0.5% increase. Car dealer sales increased 2.6%, driving most of the profits. Some of that demand is thought to reflect demand for new cars in parts of the Southeast that were hit by Hurricane Helen in October.
The increase in spending confirms that the economy is still growing at a healthy pace even as interest rates rise, a trend that prompted the Federal Reserve to earlier signal that it would lower borrowing costs next year. May be slower than it was. The Fed is scheduled to announce its latest interest rate decision on Wednesday.
The economy expanded at an annual rate of nearly 3% in the July-September period, and some economists are predicting even stronger growth in the final three months of the year. There are signs of weakness in the job market as employment has declined since last summer, but layoffs are relatively rare and the unemployment rate is low at 4.2%. Salaries are growing at a steady national average of 4%, slightly faster than inflation, contributing to higher spending.
Sales at stores selling furniture, electronics and building materials rose slightly. The retail sales report is not adjusted for inflation, so some of the increase reflects higher prices. Sporting goods stores reported an increase of 0.9%. Online retail sales increased by 1.8%.
Meanwhile, spending at restaurants and bars fell by 0.4%. Grocery store sales also fell by 0.2%.
The Federal Reserve is expected to cut its key policy rate on Wednesday for the third time this year, following deep cuts of half a percentage point in September and a quarter of a percentage point last month. But Fed officials, led by Chairman Jerome Powell, have also warned that interest rates could be cut only two or three times next year, leaving interest rates on mortgages, auto loans and credit cards well above pre-pandemic levels. It is seen as suggesting that. much lower.
The retail sales report comes as retailers ramp up sales and other offers to lure shoppers into stores in the crucial final stretch before Christmas.
Analysts had expected a strong holiday season, although perhaps not as strong as last year, with many shoppers still weighed down by high prices despite easing inflation. Overall, retailers got off to a decent start as an unofficial kickoff to the holiday shopping period, even though many discounts and sales started as early as October.
Adobe reported earlier this month that “Cyber Week” (the five days between Thanksgiving and Cyber Monday) brought in $41.1 billion in revenue across online, an 8.2% increase from the same period last year. Adobe expects sales for the entire holiday season, from Nov. 1 to Dec. 31, to reach $240.8 billion, an 8.4% increase from a year ago. Additionally, Mastercard Spending Pulse, which tracks in-person and online spending, reported that overall Black Friday sales, excluding auto, were up 3.4% year over year.
With five fewer days between Thanksgiving and Christmas this year, retailers are feeling more pressure. What’s more, the presidential election has created some distraction from shopping, with general merchandise sales down 9% in the two weeks ending Nov. 9, according to market research group Sarkana.
Sales are picking up, but stores still have to make up for losses. But there’s a big shopping day ahead. The top 10 busiest shopping days in the U.S. account for about 30% to 40% of all holiday retail traffic, according to Sensormatic Solutions, which tracks retail foot traffic. And according to Sensormatic, five of the top 10 busiest days of the holiday season, including the day after Christmas, are still on the way.
Lugabar and D’Innocenzio contributed to The Associated Press.
