Resilient Retail: Exceeding Expectations
In a surprising turn, the December retail sales data released on Wednesday showcased the unwavering resilience of US consumer spending, dispelling fears of economic stagnation in the closing months of 2023.
The figures revealed a notable 0.6% growth in retail sales for December, surpassing economists’ expectations of a 0.4% increase, as reported by Bloomberg data. November’s retail sales had already defied expectations with an unexpected 0.3% increase.
The positive trend extended to December sales, excluding auto and gas, which outperformed estimates by increasing 0.6%, double the expected 0.3% rise.
Nationwide financial markets economist Oren Klachkin expressed the sentiment, stating, “Retail sales beat expectations yet again in December.” Klachkin highlighted consumers’ willingness to spend during the holidays, predicting this trend to persist into early 2024, contingent on real income gains offsetting challenges posed by elevated interest rates and tight lending standards.
The report indicated growth in nine out of thirteen highlighted categories. Notably, sales for clothing and clothing accessories, as well as nonstore retailers, experienced a significant 1.5% increase. However, health and personal care stores witnessed a dip of 1.4%, while gasoline station sales fell 1.3%.
Resilient Retail: Exceeding Expectations – For the entire year, retail sales, excluding auto and gas, saw a substantial 4.9% increase. Food services and drinking places led the gains with an 11.3% rise, while spending at gasoline stations declined by 11.5% due to lower gasoline prices throughout 2023.
As investors closely monitored the December report for signs of a “soft landing” in the US economy, Morgan Stanley chief US economist Ellen Zentner emphasized that the robust retail sales print supports the theory that the economy is performing well enough to not necessitate a rapid interest rate cut. Fed governor Christopher Waller echoed this sentiment, stating that there is “no reason” to cut interest rates swiftly with the economy and labor markets in good shape. The retail resilience exhibited in December adds a layer of optimism to the economic landscape as inflation recedes.
