American consumers remain more than willing to spend, according to a new report from the U.S. Census Bureau. Specifically, advance estimates of retail and food services sales in December totaled $529.6 billion, a new all-time high and the 9th increase in the past ten months. Even “core” retail sales, which exclude the volatile automobile and energy components, jumped by 0.7 percent in December. That was the largest gain since July, better than expected, and helped by broad increases across 12 of the 13 major retail categories. Department store sales remained disappointing but receipts at non-store retailers (Amazon) continued to help offset such weakness.
Altogether this was another solid month for consumer spending in America, the largest component of U.S. GDP growth, and it confirms one of our takeaways from the NFIB’s December survey of small business owners released earlier this week. It is also worth noting that in 2019 consumer spending appeared closely linked to economic and policy narratives, with sales dipping when the trade war was escalating and stocks were falling, and quickly rebounding as tensions abated and markets rallied. Going forward, though, the strong labor market should return to being the key driver of consumer spending growth, and employment conditions in this country encouragingly remain about as good as one could hope for more than ten years into the expansion. In fact, the number of Americans making first-time claims for unemployment benefits has fallen this month to just 204,000. That is one of the best readings of the past half a century, another sign of employers’ reluctance to let go of talent in a tight labor market, and the exact opposite of what typically occurs ahead of a recession.
Sources: Econoday, U.S. DoC, U.S. DoL, FRBSL