There were two important reports on the U.S. economy released this morning. First, data from the U.S. Census Bureau showed that advance estimates of retail and food services sales for October totaled $465.9 billion. That was a 0.8 percent increase from September’s upward-revised gain, and helped by a 1.1 percent jump in automobile sales. Headline retail sales have now risen by 4.3 percent over the past twelve months, the fastest pace of annual growth since 2014. Even core retail sales, which exclude the volatile autos and gasoline components, lifted by 0.8 percent in October. That was much better than expected and the best monthly gain since May despite weakness at restaurants and department stores. The latter was likely offset by sales at non-store retailers (Amazon), which have surged by almost 13 percent over the past year. Overall this was an encouraging report that suggests consumer spending got off to a solid start in the final quarter of 2016. That bodes well for Q4 gross domestic product (GDP) growth and will likely make it easier for officials at the Federal Reserve to justify an interest rate hike at next month’s monetary policy meeting. Going forward, though, retail sales could face stiff headwinds if wage growth does not accelerate.
Elsewhere, a report from the Federal Reserve Bank of New York showed that manufacturing activity in the Northeast region of the country rebounded significantly this month, with the general business conditions index jumping from -6.8 to +1.5. That was much better than economists had expected, the largest monthly gain since June, and the first positive (expansionary) reading since July. Under the hood, new orders and shipments improved but measures of unfilled orders, employment, and hours worked all deteriorated. Surveyed managers’ outlooks for business conditions, capital expenditure plans, and technology spending six months from now also weakened in November.
Sources: Econoday, Bloomberg, Twitter, ZH, U.S. Census Bureau, FRBNY, FRBSLPost author: Charles Couch