Retail sales rose at healthy pace last month in latest sign of U.S. economy’s health

WASHINGTON —  Consumers stepped up their spending at retail stores last month, providing a boost to the economy in the early phases of the winter holiday shopping season.

Retail sales rose 0.7% in November, the Commerce Department said Tuesday, a solid increase and higher than October’s 0.5% gain. Sales jumped 2.6% at auto dealers and drove most of the gain. Some of that demand likely reflected a need for new cars in parts of the southeast slammed by Hurricane Helene in October.

The boost in spending underscores that the economy is still growing at a healthy pace even with higher interest rates, a trend that could cause the Federal Reserve to lower borrowing costs more slowly next year than was previously signaled. The Fed will announce its latest rate decision Wednesday.

The economy expanded at nearly a 3% annual pace in the July-September quarter and some economists forecast another solid gain in the final three months of this year. There are some signs of sluggishness in the job market, as hiring has weakened since last summer, but layoffs are also relatively rare and the unemployment rate is at a low 4.2%. Paychecks are growing at a solid 4% pace, on average nationwide, which is modestly faster than inflation and helps fuel more spending.

Sales rose modestly at stores selling furniture, electronics and building materials. Since the retail sales report isn’t adjusted for inflation, some of the increase reflects higher prices. Sporting goods stores reported a 0.9% gain. Sales at online retailers jumped 1.8%.

Spending at restaurants and bars, meanwhile, dropped 0.4%. Grocery store sales also dipped 0.2%.

On Wednesday, the Fed is expected to cut its key rate for a third time this year, after a big half-point cut in September and a quarter-point last month. But Fed officials, led by Chair Jerome Powell, are also expected to signal that they may reduce their rate only two or three times next year, leaving it far above its pre-pandemic level, when rates on mortgages, auto loans and credit cards were much lower.

The retail sales report comes as retailers are stepping up deals and other perks to get shoppers into their stores for the crucial final stretch before Christmas.

Analysts envisioned a solid holiday shopping season, though perhaps not as robust as last year’s, with many shoppers under pressure from still-high prices despite the easing of inflation. Overall, retailers had a decent start to the unofficial kickoff to the holiday shopping period despite lots of discounts and sales that started as early as October.

Adobe reported earlier this month that “cyber week” — the five-day period from Thanksgiving to Cyber Monday — brought in $41.1 billion online overall, up 8.2% from the year-ago period. Adobe expects full holiday season sales — Nov. 1 to Dec. 31 — to hit  $240.8 billion, up 8.4% compared to a year-ago. And Mastercard SpendingPulse, which tracks in-person and online spending, reported that overall Black Friday sales excluding automotive rose 3.4% from a year ago.

This year, retailers are feeling more pressure since there are five fewer days between Thanksgiving and Christmas. Moreover, the presidential election caused some distraction from shopping, sending sales of general merchandise down 9% in the two weeks ended Nov. 9, according to Circana, a market research group.

Sales have been rebounding but stores will still have to make up for those losses. But there are big shopping days ahead. In the United States, the top 10 busiest shopping days account for approximately 30% to 40% of all holiday retail traffic, according to Sensormatic Solutions, which tracks foot traffic at retail stores. And five of the top 10 busiest days during the holiday season are still on the way, including the day after Christmas, Sensormatic said.

Rugaber and D’Innocenzio write for the Associated Press.