U.S. Retail Sales Plunge 0.6% in November 2022 – Biggest Drop This Year Surprises Economists

In November 2022, U.S. retail sales experienced a significant 0.6% drop, marking the steepest monthly decline this year and twice the anticipated 0.3% decrease.

This downturn reflects the ongoing economic slowdown combined with higher borrowing expenses, which continue to suppress consumer spending.

Following the release of these figures, the S&P 500 index fell over 2%, extending losses triggered earlier by the Federal Reserve's recent interest rate hikes. Treasury yields softened, with the 10-year note stabilizing at 3.45%. Additional pressure came from weaker industrial production data and recent rate increases by the European Central Bank and the Bank of England.

Key Insights

• November's 0.6% decline in retail sales is the largest monthly drop in 2022, surpassing economists' expectations.
• Sales decreased across nine of thirteen retail categories, with furniture, home goods, building materials, and garden centers most affected.
• Conversely, bars, restaurants, and food and beverage stores saw sales growth, indicating a consumer shift from durable goods to essential staples.
• Year-over-year retail sales growth slowed, highlighting the impact of economic deceleration and higher borrowing costs.

Specifically, furniture and home goods stores saw a 2.6% sales decline, while building materials and garden centers dropped 2.5%. E-commerce sales also fell by 0.9%, despite record-breaking Black Friday sales earlier in the month.

Bars and restaurants led gains with a 0.9% increase in sales, followed by a 0.8% rise in food and beverage store purchases. This trend reflects consumers prioritizing necessities over durable goods amid financial pressures.

Unlike many economic indicators, retail sales data are not adjusted for inflation, meaning November's figures also capture the effects of slowing inflation. The Consumer Price Index (CPI) showed inflation easing to 7.1% annually in November, down from 7.7% in October and a peak of 9.1% in June.

Despite the recent decline, retail sales remain 6.5% higher than November 2021, buoyed by strong gains in early 2022. Previously, consumer spending was supported by pandemic-related stimulus and transfer payments, but rising interest rates and economic slowdown have since dampened purchasing activity.

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