UNITED STATES — Motor vehicle sales fell by 0.5 percent as unit auto sales edged down to a still-solid 17.8 million annualized unit pace (the year-to-date average of 17.4 million units matches last year’s record high), RBC Economics reported.
Rising gasoline prices (on a seasonally adjusted basis) continued to put upward pressure on sales at gasoline stations, although November’s 0.3 percent gain was the smallest in three months. Building material sales were also up for a third consecutive month, consistent with recent gains in housing starts and existing home sales (both recorded cycle highs in October). Excluding those components, so-called ‘control’ retail sales rose by 0.1 percent, short of expectations for a 0.3 percent increase.
That follows solid gains in September and October, however, leaving annualized growth over the prior three months above 4 percent. The more modest gain in November was partially due to declines in sporting goods and miscellaneous stores, both of which retraced the previous month’s gains. Growth in nonstore retailers, which includes online retail outlets, matched its weakest pace this year (0.1 percent) but was nonetheless up 12 percent from a year ago.
That November’s increase was not stronger is somewhat surprising given Black Friday and Cyber Monday sales, although it appears that seasonal factors are catching up to those trends (sales were up nearly 20 percent on an unadjusted basis in the month, the best November gain on record).
Our Take: Despite a weaker-than-expected increase in November retail sales, goods spending is on track to increase strongly in the fourth quarter. However, growth in the larger services component of consumer spending is expected to slow as unseasonably warm weather in October and November weighs on utilities outlays.
Overall, we look for consumer spending growth to moderate only slightly to a 2.4 percent annualized pace in Q4 from 2.8 percent in Q3. Our forecast assumes PCE will continue to increase steadily next year (2.5 percent compared with an expected 2.6 percent gain in 2016) as solid growth in aggregate incomes and buoyant sentiment helps fuel spending. There is also potential for proposed personal income tax cuts to provide a modest lift to consumer spending in the latter stages of 2017 although the impact of any tax relief is more likely to be felt in 2018.
SOURCE: RBC Economics press release