US retail sales beat expectations in November

• Core retail sales (excluding autos, gas, building materials, and food services) increased 0.4% in November, a key indicator for GDP's consumer spending component
• Spending growth remains heavily skewed toward higher-income households, with Bank of America noting a 'K-shape' divergence between income cohorts that widened through 2024
• October retail sales were revised down to a 0.1% decline from previously reported flat growth, while consumer spending drove much of the third quarter's 4.3% GDP growth

Summary: US Retail Sales Beat Expectations in November

Key Figures:

U.S. retail sales rose 0.6% in November, surpassing the 0.4% forecast by economists polled by Reuters. This rebound followed a downwardly revised 0.1% decline in October (previously reported as unchanged). Core retail sales, which exclude automobiles, gasoline, building materials, and food services, increased 0.4% after a revised 0.6% gain in October.

Market Implications:

The stronger-than-expected retail sales data points to solid economic growth in Q4 2024. Consumer spending drove the economy's 4.3% annualized growth rate in Q3, and the Atlanta Federal Reserve currently forecasts Q4 GDP growth at 5.1%. These figures suggest continued economic resilience despite inflation concerns.

Important Context:

The data reveals a significant "K-shaped" spending pattern, with higher-income households driving most consumption while lower-income consumers struggle with rising living costs. Bank of America Securities noted this divergence between income cohorts started in late 2024 and widened throughout the year, particularly in discretionary spending categories.

Motor vehicle purchases rebounded in November, contributing to the overall sales increase. The Commerce Department's Census Bureau released this data while catching up on delays caused by a 43-day government shutdown.

Policy Developments:

President Donald Trump has proposed several cost-reduction measures, including purchasing $200 billion in mortgage bonds and implementing a 10% cap on credit card interest rates for one year. However, banks and financial institutions warn the credit card proposal could restrict access to credit. Economists and policymakers continue to cite supply constraints as a primary factor driving housing unaffordability.