SUMMARY
- U.S. retail sales data was released last week, exceeding expectations and proving resilient in the face of high inflation and continued rate hikes by the Fed. Headline retail sales rose +1.3% in October, exceeding the expectation of +1.0%.
- Despite high inflation, 9 of the 13 retail categories reported an increase. The largest surprises seen in motor-vehicle sales (up +1.3%), and sales of vehicles and gasoline accounted for almost half the overall gain. Excluding vehicle sales and gas, consumers also showed strong spending in retail sales (up +0.9% versus the expected +0.2%). Spending at restaurants and bars increased +1.6%. Declines were seen in several discretionary goods categories, including electronics and sporting equipment. These declines reflect some changing spending habits, as consumers begin to make more careful spending decisions and choices between necessities and luxuries.
- This robust consumer spending has seemingly been financed by increases in credit; consumer credit card balances have increased by 15% year-over-year, the largest increase in over 20 years and is currently 5.6% higher than the pre-Covid peak.
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