The final retail sales report of 2024 paints a picture of resilience for the U.S. economy, with December’s data signaling strong consumer spending despite questions about the Federal Reserve’s interest rate strategy.
Core retail sales, excluding volatile categories like autos and gas, rose by 0.7% in December—beating economists’ 0.4% estimate.
While headline sales climbed 0.4%, slightly below expectations, revised November figures now show a stronger 0.8% gain, highlighting the robustness of the holiday shopping season.
This retail strength ties directly to a resilient labor market. Analysts have emphasized that steady employment and household income growth have kept spending buoyant.
A 4.3% increase in miscellaneous store sales led the gains, while a 2% drop in building materials marked the largest decline.
However, building material sales are not included in GDP calculations.
The Economic Landscape Moving into 2025
“This year’s holiday shopping season outperformed last year’s, as the labor market has continued to support household income growth,” Wells Fargo senior economist Tim Quinlan explained.
With stable employment, businesses can expect consumer spending to remain solid as 2025 begins.
Yet, the Federal Reserve’s approach to interest rates remains a wildcard. A strong December jobs report and persistent inflation suggest the Fed may delay rate cuts longer than anticipated.
As of Thursday morning, investors estimated less than a 50% chance of a rate cut before June, according to the CME FedWatch Tool.
“The strength in consumer spending, paired with a tight labor market and elevated inflation readings, supports the view that the Fed is unlikely to act in the first half of the year,” Nationwide chief economist Kathy Bostjancic noted.
As the year closes, the data reveals a compelling story: resilient spending powered by steady jobs and income growth keeps the economy on solid footing.
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