December retail sales top estimates to cap strong 2023

By Stock News On Jan 17, 2024 5 0

December retail sales out Wednesday showed US consumer spending continued to prove resilient to round out 2023, pushing back against fears economic growth stalled in the year’s final months.

Retail sales grew 0.6% in December, according to Census Bureau data. Economists had expected a 0.4% increase, according to Bloomberg data. November retail sales previously posted a surprise 0.3% increase.

December sales, excluding auto and gas, increased by 0.6% compared to estimates for a 0.3% increase.

“Retail sales beat expectations yet again in December,” Nationwide financial markets economist Oren Klachkin wrote in a research note on Wednesday. “Consumers were willing to spend during the holidays and will remain inclined to do so as long as real income gains more than offset the drag from elevated interest rates and tight lending standards.

“We think this narrative will persist in early 2024 but then lose steam as the job market deteriorates.”

Nine of the 13 categories highlighted in the release saw increases from a month ago.

Sales for clothing and clothing accessories, as well as nonstore retailers, increased 1.5%. Meanwhile, sales at health and personal stores care dipped 1.4%, while sales at gasoline stations fell 1.3%.

For the full year, retail sales, excluding auto and gas, increased by 4.9%. Sales at food services and drinking places rose 11.3% for the year, pacing the gains, while spending at gasoline stations declined 11.5% as gasoline prices dipped lower throughout 2023.

The December report was expected to be closely watched by investors looking for signs of a “soft landing” in the US economy, where inflation cools to the Fed Reserve’s targeted 2% rate without an extreme downturn in economic activity.

On Tuesday, Fed governor Christopher Waller said that with economic activity and labor markets in “good shape” as inflation recedes, there is “no reason” to cut interest rates as rapidly as in the past.

Morgan Stanley chief US economist Ellen Zentner believes Wednesday’s retail sales print supports Waller’s theory that the economy is actually doing well enough it doesn’t need an interest rate cut to stay afloat.

“The beat on control retail sales supports Governor Waller’s recent remarks the economy is strong enough that the Fed can remain patient in determining its next move,” Zentner wrote in a note to clients on Wednesday. “We expect the Fed to first cut the funds rate in June, while noting risk toward an earlier start in May (vs market pricing March).”