US economy strengthens with a healthy rise in retail sales

WASHINGTON, D.C.: Retail sales in the U.S. grew by 0.7 percent in November, signaling continued economic strength despite higher interest rates, according to the Commerce Department.

The increase outpaced October's 0.5 percent rise, driven primarily by a 2.6 percent surge in auto sales. Demand for new cars was partly fueled by recovery efforts in areas affected by Hurricane Helene and aggressive discounts from car dealers.

"We ultimately expect this will be a decent holiday sales season for retailers," said Tim Quinlan, an economist at Wells Fargo. "It is not going to knock anyone's socks off... but continued consumer momentum means it is unlikely to be overly weak either."

Other sectors saw mixed results. Sales rose modestly at furniture, electronics, and home improvement stores, while grocery stores and restaurants posted declines of 0.2 percent and 0.4 percent, respectively. Online sales were a bright spot, jumping 1.8 percent, while sporting goods stores saw a 0.9 percent increase.

Despite inflation easing, some sales gains may reflect higher prices, as the retail sales report is not adjusted for inflation. Analysts predict the economy will expand at a steady pace in the final quarter of the year, following a nearly 3 percent annual growth rate in the July-September period.

Steady pay growth-averaging 4 percent nationwide-is also helping fuel consumer spending, though hiring has slowed this year. Unemployment remains low at 4.2 percent, and layoffs are rare.

The Federal Reserve is expected to announce another interest rate cut on Wednesday, following previous reductions this year. However, Fed officials, including Chair Jerome Powell, may signal fewer rate cuts in 2024 as they aim to maintain borrowing costs above pre-pandemic levels.

Retailers face added pressure this holiday season with fewer shopping days between Thanksgiving and Christmas and distractions from the presidential election. Still, early holiday sales have been solid. Adobe reported that "cyber week" sales reached $41.1 billion, an 8.2 percent increase over last year, while Mastercard SpendingPulse showed Black Friday sales rose 3.4 percent.

Foot traffic at malls like Newport Centre Mall in New Jersey remains steady, with shoppers drawn by significant discounts. However, some consumers are cautious, like Abraham Ferreyra, who said, "We have a mortgage to pay, so we can't be giving too much."