“Recent trends in both income and spending suggest the consumer recovery is losing some momentum,” said Michael Brown, Principal U.S. Economist. “The re-introduction of shelter-in-place orders in November clearly had an adverse effect on spending. Holiday sales categories continued to perform well, with non-store retail helping to keep holiday spend elevated.”
November retail sales (excluding auto sales) fell 1.1 percentage points from October’s level to a 3.6% year-over-year (YoY) growth rate. Non-store (e-commerce) sales accelerated in November and are now up 30% YoY.
Disposable income growth slowed to 6.2% YoY in October as stimulus effects waned. Government social benefits, which capture unemployment insurance benefits, fell 6.2% month over month as many individuals began to exhaust their benefits. Nominal consumer spending marginally improved in October, rising 0.5% from the prior month. Nominal spending continued to slowly inch towards recovery, with total spending down 0.6% on a YoY basis.
The recovery in consumer spending remained unequal across spending categories—goods purchases were up 7.9% YoY verses services spending, which remained down (4.4%) relative to last year’s levels.
Consumer price growth remained at 1.2% year-over-year for the second consecutive month. Used cars and trucks led price growth for all spending categories on a YoY basis for the third consecutive month, increasing 10.8% from last year. November’s consumer confidence reading fell 5.3 points to 96.1. October’s job gains were revised down to 610,000 from the originally reported 638,000 jobs. The current wave of COVID cases significantly hampered the pace of the labor market recovery, as only 245,000 jobs were added in November. The unemployment rate declined 0.2 percentage points in November, finishing the month at 6.7%.
“The current significant wave of COVID cases led to a renewal of more stringent restrictions on businesses and consumers, said Travis Clark, Assoc. U.S. Economist. “This brought consumer price growth to a halt and resulted in a deceleration in employment growth. Consumer confidence also took a hit in November.”