- Retail sales fall 0.6% in November
- Core retail sales down 0.2%; October sales revised down
- Weekly jobless claims fall from 20,000 to 211,000
WASHINGTON, Dec 15 (Reuters) – U.S. retail sales fell more than expected in November, but consumer spending remains supported by a tight labor market as the number of Americans filing for unemployment benefits fell the most in five months last week.
The biggest drop in retail sales in 11 months reported by the Commerce Department on Thursday was likely a payback after surging sales in October as Americans started their holiday shopping early to take advantage of discounts from businesses desperate to weed out excess inventory.
Still, weak sales suggested higher borrowing costs and the threat of an impending recession was beginning to impact household spending.
“The lack of tracking through November suggests consumers are much more cautious with their money amid recession fears and the draining effect of high headline inflation and sharply rising borrowing costs,” said Sal Guatieri, senior economist at BMO Capital Markets in Toronto. .
Retail sales fell 0.6% last month, the biggest drop since December 2021, after an unrevised jump of 1.3% in October. Economists polled by Reuters had forecast sales falling 0.1%.
Retail sales, which are mostly goods and not adjusted for inflation, rose 6.5% year-on-year in November. Consumers dipped into their savings to finance their purchases. The savings rate was 2.3% in October, the lowest since July 2005.
Sales at car dealerships fell 2.3% last month as motor vehicles remained in short supply. Gasoline station receipts fell 0.1%, reflecting lower gasoline prices.
The increase in one-time tax refunds 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.
Online retail sales fell 0.9%. Furniture store sales fell 2.6%. Sales for food services and drinking places, the only service category in the retail sales report, rose 0.9%. Sales at electronics and appliance stores fell 1.5%.
There were also revenue declines at general merchandise stores as well as sporting goods, hobby, musical instrument and book stores. Clothing store sales fell 0.2%.
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.
US stocks opened lower. The dollar appreciated against a basket of currencies. US Treasury yields fell.
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. Last week’s drop in claims was the largest since July and pushed them to a three-month low. .
Economists had forecast 230,000 claims for the past 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.
The claims report also showed the number of people receiving benefits after a first week of help, a proxy indicator of employment, rose by 1,000 to 1.671 million in the week ending December 3. . Although this was the highest reading since February, the pace of increase in so-called continuing claims has slowed from previous weeks.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
Our standards: The Thomson Reuters Trust Principles.