EconoFACTS

December 17, 2024 | 10:06

U.S. Retail Sales Climb while Industrial Production Stumbles

Economist

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

Scott Anderson , Ph.D.

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

The U.S. consumer was alive and well in November. Retail sales increased a better-than-expected 0.7%, up from an upwardly revised 0.5% gain in October. It was the best monthly performance for retail sales since September. The consensus had been looking for a 0.6% increase. We saw strong monthly sales gains in motor vehicles and parts (+2.6%), non-store retailers (+1.8%), and sporting goods (+0.9%) as consumers took advantage of early Black Friday deals. Healthy sales gains were also seen in building materials (+0.4%), furniture (+0.3%), and electronics (+0.3%) as consumers searched for bargains. Gasoline stations eked out a 0.1% sales increase.

There were also visible signs of spending weakness in some categories as rising prices force more consumers to pick and choose where they direct their monthly budgets. Miscellaneous retailers, like florists, gift shops, and office supply stores, saw a 3.5% decline in sales last month. Department store sales fell 0.6% and eating and drink establishment sales fell 0.4%. Consumers have been shying away from eating out lately given the rapid increase in prices. Sales also dropped for grocery stores (-0.2%), clothing stores (-0.2%), and general merchandise (-0.1%) stores last month. The retail sales control group, sales excluding food and beverages, gasoline, building materials, and autos, and used as an input in estimating real consumer spending, increased a robust 0.4% in November up from a -0.1% print in October. That puts the 3-month average annualized growth rate of retail control group sales up a sizzling 6.5%.

Meantime, U.S. manufacturers continue to struggle, and industrial production continued to backslide in November. Industrial production has fallen now for three consecutive months and four of the past five months since July. The Boeing strike and hurricanes both helped push industrial production lower in recent months, but the strong dollar and weakness abroad are also likely important factors. Industrial production fell 0.1% with manufacturing production managing a modest 0.2% gain following a 0.7% decline in October. Both came in weaker than consensus forecasts. Capacity utilization slipped to 76.8% from 77.0% in October. Utilities production fell 1.3% while mining fell 0.9% last month. As expected, we saw a solid rebound in motor vehicle production (3.5%) and machinery (2.1%), but declines in information processing, defense and space, construction supply, business supplies, materials, and energy production.

Bottom Line: The data show a mixed picture of the consumer and producer economy. The strength in November retail sales and upward revisions to October will likely prompt another round of modest upward revisions to Q4 real consumer spending and GDP forecasts, solidifying the current strength and resilience of the economic expansion. While it won’t stop the Fed from cutting interest rates this week, it will keep market expectations around the extent and pace of rate cuts next year up in the air.

Table 1 - United States — Retail Sales

(month/month % change)

Source: BMO Economics, Haver Analytics

Table 2 - United States — Industrial Production

(month/month % change : s.a.)

Source: BMO Economics, Haver Analytics