November Business Conditions Monthly

Chart 1. Steady growth in retail sales for much of the past four years supports an optimistic outlook on holiday spending.
Retail sales stay solid heading into the holidays

Consumer spending slowed to a 2.1 percent annual rate in the third quarter from a strong 4.3 percent pace in the second quarter, according to the latest data on real gross domestic product from the Bureau of Economic Analysis. On a year-over-year basis, personal consumption expenditures, a measure of real consumer spending, grew at a 2.6 percent rate, down slightly from a 2.7 percent pace in the second quarter (Chart 1).

Growth in real retail sales (a subset of total PCE) has been much stronger (Chart 1), climbing into the 4-to-6 percent range for much of the past four years. This strong performance is consistent with the continued gains in jobs (the unemployment rate is now 4.9 percent) and slowly accelerating gains in hourly earnings (up 2.8 percent over the 12 months through October). As the always-important holiday spending season approaches, healthy gains in real retail sales and generally strong consumer fundamentals provide solid ground for optimism.

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Chart 1. Steady growth in retail sales for much of the past four years supports an optimistic outlook on holiday spending.

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