November retail strength: Control group signals firm underlying demand

Summary

November retail sales rose 0.6%, and despite some downward revisions to prior data, we see consumer spending momentum carrying into Q4. That said, watch out for a comparatively soft December as previewed in both our Holiday Sales outlook and in high frequency data.

Source: U.S. Department of Commerce and Wells Fargo Economics

Holiday spending was in full swing in November

Retail sales rose 0.6% in November, following a flat reading in October. A rebound in auto sales helped, but not as much as expected. Even after excluding autos, sales still rose 0.5%.

The control group series removes sales at auto dealers, gasoline, building materials, and food services stores. These categories are removed because they are driven heavily by price swings, seasonality, or factors not reflective of consumer fundamentals (e.g., construction activity, energy prices, vehicle incentives). What’s left are the retail categories that give the best signal of underlying core goods consumption and that measure rose 0.4% in November after a downward revision put the October increase in control group at 0.6%. The upshot is a still-resilient consumer coming into the homestretch with plenty of momentum.

Download The Full Economic Indicator