WASHINGTON, Dec 15 (Reuters) – U.S. retail sales fell more than expected in November, likely a return on investment after surging the previous month, as the job market remains tight, the number of Americans asking for unemployment benefits having decreased last week.
The Commerce Department said Thursday that retail sales fell 0.6% last month. October data has not been revised to show an acceleration in sales of 1.3%. Economists polled by Reuters had forecast sales falling 0.1%.
Retail sales are primarily goods and are not adjusted for inflation. Last month’s drop in sales suggests that holiday shopping has been postponed until October. Motor vehicle shortages also dented sales at car dealerships.
The one-time tax refund boost in California, which saw some households receive up to $1,050 in stimulus checks in October and Amazon’s second Prime Day, faded last month. Other factors that hurt sales included the rotation of spending towards services and discounts by retailers eager to entice cash-strapped consumers to clear unwanted inventory.
High inflation and rising interest rates are squeezing household budgets, although consumer spending has remained resilient, thanks to a strong labor market. Consumers also dipped into their savings to finance their purchases. The savings rate was 2.3% in October, the lowest since July 2005.
The Federal Reserve raised its key rate by half a percentage point on Wednesday and forecast at least another 75 basis points of higher borrowing costs by the end of 2023. That rate was raised by 425 points this year, rising from near zero to a range of 4.25% to 4.50%, the highest since the end of 2007.
Excluding automobiles, gasoline, building materials and food services, retail sales fell 0.2% last month. Data for October has been revised down to show these so-called core retail sales rose 0.5% instead of 0.7% as previously reported.
STRUCTURAL LABOR SHORTAGE
Core retail sales correspond most closely to the consumer spending component of gross domestic product.
Weakness in core retail sales should be offset by gains in services spending, which will keep consumer spending and the economy as a whole on a moderate growth path this quarter. The economy grew at an annualized rate of 2.9% in the third quarter after contracting in the first half.
Consumer spending continues to be supported by labor market tightness, which is keeping wages high.
A separate Labor Department report on Thursday showed initial claims for state unemployment benefits fell by 20,000 to a seasonally adjusted 211,000 in the week ended Dec. 10. Economists had forecast 230,000 claims for the past week.
Claims are volatile at the start of the holiday season as businesses temporarily close or slow hiring. They hit a three-month high a week before the Thanksgiving holiday, only to nearly ease the surge the following week.
Claims remained below the 270,000 threshold, which economists said would set off a wake-up call for the labor market, despite a wave of layoffs in the tech sector.
Companies are generally reluctant to lay off workers, having struggled to find labor in the wake of the COVID-19 pandemic, a fact that Fed Chairman Jerome Powell acknowledged on Wednesday. . Powell described the labor market as “extremely tight”, adding “it feels like we have a structural labor shortage”. There were 1.7 job openings for every unemployed person in October. (Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)