US retail sales increased more than expected in November amid an acceleration in motor vehicle purchases, consistent with strong underlying momentum in the economy as the year winds down.
Retail sales jumped 0.7% last month after an upwardly revised 0.5% gain in October, the Commerce Department's Census Bureau said on Tuesday.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, advancing 0.5% after a previously reported 0.4% rise in October.
Solid Increase
Estimates ranged from a 0.1% dip to a 1.0% jump. Labour market resilience, characterised by historically low layoffs and strong wage growth, is underpinning consumer spending and keeping the economic expansion on track.
Strong household balance sheets, reflecting record stock market prices and high home prices, are also driving spending.
Household savings remain supportive.
The solid increase in retail sales came despite a late Thanksgiving holiday that pushed Cyber Monday into December, and was consistent with a strong start to the holiday shopping season.
Warmer Inflation Readings
It was also in spite of a less favourable seasonal factor, the model that the government uses to strip seasonal fluctuations from the data.
Federal Reserve officials were due to start a two-day policy meeting on Tuesday and were expected to cut interest rates by 25 basis points on Wednesday, the third reduction in borrowing costs since the U.S. central bank embarked on its easing cycle in September.
Strong retail sales added to warmer inflation readings in recent months in suggesting that the Fed could pause rate cuts in January. President-elect Donald Trump's incoming administration's planned policies, including tariffs on imports and mass deportations of undocumented immigrants, are also seen complicating matters for the central bank.
Retail sales excluding automobiles, gasoline, building materials and food services rose 0.4% last month after an unrevised 0.1% dip in October.
These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product.
Consumer spending grew at a 3.5% annualised rate in the third quarter, accounting for most of the economy's 2.8% pace of expansion during that period. The Atlanta Fed is currently forecasting GDP increasing at a 3.3% pace in the fourth quarter.
