November retail sales registered strong gains in data released this morning, with headline retail sales rising by 0.8% above an October level that was revised upward by 0.2%. Our “control” sales measure, tallying sales excluding vehicles, gasoline, and building materials, was also up by 0.8% with 0.2% upward revisions to October.
As shown in the accompanying chart, the November news was the strongest retail sales performance in quite some time and was enough to single-handedly boost the six-month growth rate for sales from last month’s 3.4% rate to 4.7% this month.
Sales were up nicely at virtually every type of store. The only sectors not showing strong gains were car dealers, grocery stores, and department stores, and even there, car dealers and grocery stores were coming off of elevated sales levels for October. In other words, it is hard to find a clunker in today’s news.
Needless to say, the November retail gains—and October revisions—were much stronger than we had been expecting. Retail sales growth had been decent but steady for the last few years, even while consumer spending on services (not covered by retail sales) looked to have slowed over the last six months. The November sales, of course, marked the first month of the Christmas season, and seasonal vagaries could easily have temporarily boosted sales growth in November. For now, however, such thoughts are definitely Scrooge-like. One can’t argue with the facts of what is clearly a strong report.
Right now, we are seeing forecasts for 4Q17 GDP all over the place. At last report, the New York Fed model was looking for 3.9% 4Q17 growth, while the Atlanta Fed was at 2.5%, joined there by a couple of Wall Street banks. Our own model was registering something like 1.5% growth, thanks to October news that showed big reverses in both the trade balance and inventories. The November sales news will boost all projections, but we would expect the guesstimates to congeal around a low 2% type number in the weeks to come.