Consumers ‘upbeat ... happy to spend money,’ data suggest
U.S. retail-sales figures Friday signaled consumer spending, the biggest part of the economy, is poised to drive another quarter of strong growth while other segments face headwinds.
The value of overall sales rose 0.2 percent in November, topping forecasts, after an upward revision to the prior month, Commerce Department data showed.
The so-called control group subset, which some analysts use to gauge underlying consumer demand, climbed 0.9 percent, the most in a year and more than double projections.
Americans took advantage of lower fuel prices and Black Friday sales that kicked off the holidayshopping season last month, setting up household consumption for a stronger-than-expected quarterly increase following what were already the best back-to-back gains in four years.
That will help overcome less upside from another part of the economy: manufacturing output stagnated in November following a drop.
“It unquestionably points to a consumer that continues to be upbeat and happy to spend money,” said Ward McCarthy, chief financial economist for Jefferies.
Consumption in the fourth quarter will “again be very strong and a source of growth,” he said. “Once we move past this, we’re not going to see consumer spending quite as strong, but consumer fundamentals are really good.”
Factory output was unchanged last month while the prior month’s reading was revised to a decline from a gain, Federal Reserve data showed Friday.
The results missed the Bloomberg survey median forecast for a 0.3 percent gain.
Total industrial production increased 0.6 percent, helped by growth in mining and a cold-weather boost to utilities.
“The recent slide in oil prices could not have come at a better time for consumers. A drop in prices at the pump will help support solid growth in discretionary spending during the holiday shopping season and the start of 2019,” Yelena Shulyatyeva and Carl Riccadonna of Bloomberg Economics said in a note.
While the economy’s pace is still projected to moderate in the final three months of the year from 3.5 percent in the third quarter, retail sales alleviated some concerns that growth is weakening even more.
Analysts at Macroeconomic Advisers on Friday raised their tracking estimate for the annualized pace of gross domestic product gains to 2.6 percent from 2.1 percent.
The Atlanta Fed’s GDPNow tracker moved to 3 percent from last week’s 2.4 percent, while Barclays Plc boosted its forecast to 2.9 percent from a prior estimate of 2.5 percent.
Outside the U.S., signs of cooling continue to mount: Data from China earlier Friday showed the world’s second-largest economy slowed again in November. Industrial production growth decelerated to 5.4 percent from a year earlier, below all 38 economists’ estimates. Retail sales rose 8.1 percent from a year earlier, the slowest pace since 2003.
In financial markets, U.S. stocks erased a weekly gain and Treasuries rose as mounting concern over the health of the global economy overshadowed positive trade developments and signs of strength in the American consumer.
“We expect to see continued softening in the pace of manufacturing growth in the coming year, as both U.S. and global growth slow and the dollar remains a headwind for exporters,” Sarah House, senior economist at Wells Fargo Securities, said in a note.
The retail sales gain also reinforces traders’ bets that the Federal Reserve will lift interest rates next week for the fourth time this year.
The figures may support the case for further tightening in 2019 after investors and economists marked down their projected paths for borrowing costs. While retail sales were robust, they only account for less than half of total household purchases.