Retail Sales Lodge Modest Gains in November

Consumer Spending Still Remains Strong

Rising inflation, an early start to the holiday shopping season, and inventory shortages caused consumers to scale back spending in November. That resulted in retail sales rising at a modest seasonally adjusted pace of 0.3% for the month. For context, that is lower than the 1.8% sales gain seen in October.

Despite the modest uptick month-over-month in November, consumer spending remains strong. Retail sales, year-over-year, were 18.2% higher last month—even with a 6.8% rise in consumer prices in November.

Still, there are signs emerging that consumers may not be able to bear the brunt of rising prices for much longer. With inflation at a nearly 40-year high, consumers are spending more at the pump and for rent. That leaves less room for spending on holiday gifts.

Early Start to Holiday Shopping Partly to Blame

Another factor that weighed on retail sales in November is an early start to the holiday shopping season this year. With supply-chain delays dragging on for months, consumers began shopping earlier than previous years. This unique phenomenon drove retail sales up in October, but contributed to the November slowdown.

Sales at electronics stores declined 4.6% in November, while spending at general merchandise retailers fell 1.2%. Sales for online retailers were flat month-over-month. Consumers did spend more on sporting goods, musical instruments, and books during the month. Sales at gas stations were up 1.7% in November and 52% higher than last year. That is being driven by rising energy prices.

Lowe’s Warns of Pullback

While economists blamed the modest uptick in retail sales largely on an early holiday shopping season, non-holiday-centric retailers are also seeing a pullback. Home improvement retailer Lowe’s (LOW) warned yesterday it expects consumers to rein in spending in 2022 compared to this year. The company is projecting same-store sales could decline 3% or be flat with 2021 levels. Lowe’s expects fiscal year 2022 sales of $95 billion, which is below the $97.64 billion Wall Street forecasted.

Throughout the year consumers have shrugged off rising prices. But with more expensive trips to eat or fill up a vehicle, retail sales are starting to cool. Whether the pullback continues in the new year depends largely on how inflation fares.

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