WASHINGTON (AP) — U.S. retail sales rose by 0.7% in November 2024, surpassing economists’ expectations and signaling a strong start to the holiday shopping season. According to the Census Bureau, the increase was driven by solid sales in automobiles and strong online spending.
The 0.7% jump follows an upwardly revised 0.5% increase in October, and exceeded analysts’ forecast of a 0.5% gain for November. This performance is especially positive as it marks the beginning of the critical holiday season, which accounts for a significant portion of yearly retail sales.
Online Sales and Dining Out Surge
Online sales recorded a particularly strong performance, with annual gains of 7.9%. Consumers took advantage of numerous promotions around the Thanksgiving holiday, contributing to the overall increase. Additionally, spending at eating and drinking establishments saw a notable rise of 4.9% from a year ago, further underscoring the strength of consumer confidence in the economy.
Piyush Patel, Chief Strategic Business Development Officer at Algolia, an AI search firm, noted that with the economy “humming along” and a settled election outcome, consumer confidence was boosted. He said, “Consumers had the confidence to spend, whether through cash or debt.”
2025 Consumer Spending Outlook
Looking ahead to 2025, experts expect consumer spending to continue growing, but at a slower pace than in 2024. Michele Raneri, vice president at TransUnion, forecasted a 2.9% increase in after-inflation consumer spending for 2025, a deceleration from this year’s expected 5.2% growth rate. She attributed this slowdown to a return to more normal spending patterns following the pandemic-era surge. “It will be more stable, a sign that things are getting back to normal,” Raneri stated.
The strong retail sales report comes at a critical time as the Federal Reserve meets to discuss interest rate policy. Analysts widely expect the central bank to lower rates by a quarter point, marking a shift toward a slightly less accommodative stance in 2025. This decision will likely reflect recent strong economic data and growing concerns about inflation pressures, despite the Fed’s ongoing efforts to tame inflation.
Inflation and the Fed’s Policy Path
Inflation concerns are growing as the U.S. economy shows signs of strength. Chris Brigati, Chief Investment Officer at SWBC, expressed worries about a potential re-acceleration of inflation in 2025, noting that the policies of the Trump administration—including tariffs and tax cuts—could push prices higher and reignite inflationary pressures. Additionally, recent Consumer Price Index (CPI) and Producer Price Index (PPI) data have shown signs that the disinflationary trend may be slowing.
“There is a meaningful concern that inflation may resume, and the Fed may need to continue with a restrictive policy stance,” Brigati said.
Market Reaction and Stock Market Trends
The robust retail sales data comes as the stock market faces a turbulent period. After a post-election rally, stocks have fallen sharply, with the Dow Jones Industrial Average experiencing its eighth consecutive day of losses on Monday, marking the longest losing streak since 2018. As of early Tuesday, futures for the Dow were down by nearly 200 points.
As market analysts continue to assess the balance between strong economic data and inflation risks, the Federal Reserve’s upcoming decisions on interest rates will be critical in shaping the economic outlook for 2025.
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