Retail Spending Up 4.2% Over the Last Year

​Last week, the Commerce Department’s retail spending report showed a notable gain in retail spending for the trailing twelve months through November, showing strong consumer demand heading into the holidays. Also, the Institute for Supply Management (ISM) released its semi-annual economic growth survey, revealing that although purchasing and supply managers expect revenue and investment growth, they believe 2019 will be a weaker year than 2018. Lastly, the Labor Department shared the November Consumer Price Index, which showed flat growth from October and a 2.2% annual increase. This week, the Federal Open Market Committee will meet on Tuesday and Wednesday to determine whether a rate hike is justified.

• Leading into the holiday shopping season, Americans’ retail spending climbed 0.2% during November and 4.2% for the trailing twelve months to $513.5 billion, according to the Department of Commerce. Excluding the volatile food and energy categories, the figure rises to a 0.5% monthly increase in November. Rising wages and elevated consumer confidence contribute to the large annualized increase in spending. The Commerce Department’s report also goes on to show strong U.S. consumer demand despite rising interest rates, a widening trade gap, and a cool-down in the manufacturing sector.

• The ISM released its semi-annual economic growth survey, detailing expected economic and manufacturing growth in 2019 through increased sales, investment and hiring. However, many business owners are becoming wary about next year being better than the last, citing rising costs for labor and materials by way of tariffs and a historically low unemployment rate. Costs are expected to increase by 2.5% within the manufacturing sector and 3.2% outside, placing increased pressure on profit margins. Furthermore, 65% of executives say they are evaluating new supply sources to resolve tariff-related issues. Though, compared with May 2018’s survey, fewer respondents are concerned about tariffs raising the prices consumers pay or causing disruptions in the supply chain.

• November’s month-to-month Consumer Price Index growth reading was the lowest in eight months, largely due to the sharp decline in gasoline prices. The Labor Department’s monthly report shows the CPI stayed flat in November following October’s 0.3% monthly rise. For the twelve months through November, the CPI gained 2.2%, down from October’s 2.5%. Excluding food and energy products, the Index grew 0.2% monthly and 2.2% annually. Both annual figures are above the Fed’s target rate of 2.0%. Measures of the inflation rate have been watched closely recently, as any sustained increase in inflation gauges will prompt the Federal Reserve to continue its path of rate hikes for this month and 2019.