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Consumers’ Strong Start to Holiday Shopping


Retail sales in November surpassed expectations, with a significant increase from the previous month. Economists predicted a decline of 0.2%, but instead, sales rose by 0.3%. On a yearly basis, sales were up by 4.1% compared to November of the previous year.

The October figures were revised to show a drop of 0.2% rather than the previously reported 0.1% decline.

When excluding automobile and gasoline sales, November saw a substantial jump of 0.6% compared to the previous month, surpassing the anticipated increase of 0.2%. However, lower prices at the pump affected sales at gasoline stations, which dropped by 2.9%.

“The significant increase in retail sales disproves claims of a struggling consumer and economy,” commented Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

These findings indicate that consumers have not been deterred by macroeconomic challenges such as higher interest rates, inflation concerns, and the resumption of student loan payments. The holiday season has been largely unaffected.

Various gift-friendly categories experienced growth in sales during this period. Sporting goods, hobby, and book stores witnessed a rise of 1.3%. Clothing and accessories sales increased by 0.6%, while furniture and home furnishing stores, as well as health and personal care stores, saw a respective increase of 0.9%.

“Preholiday sales and relief from inflation likely contributed to increased consumer spending,” explained Kayla Bruun, senior economist at Morning Consult.

While overall sales were strong, the growth in online shopping and dining out played a significant role in the boost observed in November. This suggests that online retailers are continuing to secure a significant portion of consumer spending, as individuals prioritize experiences over material goods.

Sales at nonstore retailers, primarily e-commerce stores, experienced an increase of 1%, reinforcing early reports of robust online sales during the Black Friday and Cyber Monday weekend. Additionally, food services and drinking places saw a sales increase of 1.6%.

The Economy Shows Promise, But Caution Still Lingers

The latest report on the economy provides an encouraging outlook for the future. Following the Federal Reserve’s decision not to raise interest rates, the report indicates that consumers will continue to drive economic growth well into 2024. It suggests that the Fed is close to achieving a smooth transition for the economy.

According to Callie Cox, a U.S. investment analyst at eToro, the strong retail sales figures and the Fed’s message should instill confidence in investors. She believes that we are nearing a positive outcome, with minimal obstacles along the way.

However, some economists and investors advocate for caution as we approach the new year. Michael Pearce, the lead U.S. economist at Oxford Economics, argues that despite November’s impressive performance, real consumption growth in Q4 is still lower than in Q3. He anticipates a slowdown in the labor market and the impact of elevated interest rates to exert downward pressure on spending growth in 2024.

Notably, there are signs that consumers are not entirely immune to the macroeconomic climate. Sales of big-ticket items, which are more sensitive to high interest rates, have experienced a decline. Specifically, electronics and appliances sales have dropped by 1.1%, while building materials and garden supply dealers have seen a decrease of 0.4%. Department stores have also struggled this month, with sales down 2.5%.

Kathy Bostjancic, the Chief Economist at Nationwide, adopts a cautious stance in response to the report. While consumer resilience is indicative of a potential soft landing for the economy, it also suggests that the central bank may not cut rates as swiftly as the markets have anticipated.

Bostjancic emphasizes that as long as economic activity remains robust, inflation will decline at a slower rate, prompting the Fed to respond with more gradual rate cuts.

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