Solid US Retail Sales to Give Economy a Boost Heading Into 2024

• The Commerce Department reported that U.S. retail sales for December surpassed forecasts, showing a 0.6% increase. This positive performance was primarily driven by higher sales in motor vehicles and the online retail sector, suggesting consumer spending remained robust as the year ended.
• The stronger-than-expected retail sales in December led economists to revise their estimates for economic growth in the fourth quarter. However, this optimistic outlook contradicts market expectations of an impending interest rate cut by the Federal Reserve in March, indicating a level of confidence in the overall economic health.
• The recent data, including strong employment and wage gains in December, as well as an uptick in consumer prices, collectively signal a healthy economy. Federal Reserve Governor Christopher Waller's characterisation of the economy as "doing well" reinforces the positive sentiment, providing the central bank with flexibility in its monetary policy approach.
• Retail sales in December saw a broad increase, with online retailers experiencing a notable 1.5% boost in sales. Additionally, motor vehicle and parts dealers saw a significant acceleration of 1.1% in sales. This reflects a continuing trend of consumers turning to online platforms and maintaining interest in purchasing vehicles.
• Despite signs of credit card delinquencies, households have managed to navigate high interest rates and resumed student loan payments. The data suggests that the economy, though experiencing a cooling of spending from the brisk pace of the third quarter, is still strong enough to stave off concerns of an imminent recession. With expectations of Federal Reserve interest rate cuts in the coming year, most Economists express confidence in the economy's ability to avoid a downturn.

(Source: Reuters)