Personal Wealth Management / Market Analysis
Looking at America’s Latest Monthly Data
Retail sales, industrial production and business inventories still look good enough for stocks.
A common theme this year? The US economy, while not perfect, sidestepped a recession again while largely surpassing expectations. The slate of November data—retail sales, industrial production and business inventories—mirrored this: Not gangbusters, but continuations of trends that have been good enough for stocks this year.
November Retail Sales Beat Expectations.
The Census Bureau’s latest report showed US retail sales rising 0.7% m/m in November, their third consecutive monthly rise and ahead of analysts’ estimates. Core sales, which exclude automobiles, gasoline, building material and food services, met expectations with a 0.4% m/m jump.[i] Under the hood, strong sales for autos and online retailers offset a -3.5% m/m decline in the catch-all “miscellaneous stores” category.
Now, auto sales have been quite volatile post-pandemic tied to seasonal adjustment difficulties, which could be at play here. But robust online sales suggest holiday shoppers opted to buy more presents on the Internet—a long-running theme. And for all the pundits’ chatter over “a tapped US consumer” paring spending back to only the essentials this holiday season, November didn’t support their case. Sales growth concentrated in discretionary categories like autos, furniture and sporting goods, while the essentials—food and beverage and clothing stores—struggled.
Overall, November’s report continued a nice run for retail sales—October’s were revised up, too.[ii] Good news, but don’t overrate the broader economic effect here. The majority of consumer spending is on services—think insurance, gym memberships, healthcare, utilities or landscaping—most of which aren’t captured here. Plus, these data aren’t inflation-adjusted, making retail sales but an incomplete preview of the full consumer spending report. That came out during the holiday home stretch: November’s real (inflation-adjusted) personal consumption expenditures (PCE) index showed US goods spending rose 0.7% m/m, while services spending ticked up 0.1%.[iii] Overall, data point to healthy US consumers—defying earlier warnings of households tightening the purse strings.
Industrial Production (IP) Fell but Moderated From Last Month’s Dip.
IP fell -0.1% m/m in November, easing from October’s downwardly revised -0.4% drop.[iv] Key to this: Manufacturing bounced back, rising 0.2% m/m as a rebound in transportation equipment production—from October’s -5.8% m/m to 1.4% growth—drove results. We suspect this is tied to employee strikes concluding at one major American airplane maker that rhymes with “crowing.” Elsewhere, furniture and machinery production helped, too.
Looking back, manufacturing endured a 2024 grind to largely sideways output. November’s return to the black was great, but it is too early to tell if a lasting revival is underway. Regardless, manufacturing has struggled since July 2021, when the hangover from the post-pandemic goods spending boom steered demand away from factories to services businesses. It isn’t yet clear how long it will take for more traditional spending habits to return, as that kind of boom in spending on stuff was unique. Either way, the sector’s struggles are ancient news for stocks, so we doubt there is some significant, unseen surprise power lurking under the surface.
As for headline IP, weaker utilities production bogged it down. Both subcategories—electricity and natural gas—contracted, but the latter fell more, falling -2.3% m/m for its third consecutive drop. Weakness here could be lingering from hurricanes and other weather events earlier this fall. Beyond this, mining output fell -0.9% m/m. This segment, influenced heavily by energy production and exploration, has been flattish for over a year. In our view, the glut of US natural gas depressing prices alongside lower oil prices has dissuaded activity.
Inventories Inched Up in October—Proof of Corporations’ Anticipation at Work?
Headlines have highlighted one development for weeks now: Supposedly, America’s businesses are beefing up their inventories ahead of President-elect Donald Trump’s widely feared tariffs. The thinking: Tariffs would add costs to many imports, incentivizing US businesses to load up their warehouses before Trump can hypothetically implement them in January. Sounds reasonable, as experience tells us businesses generally dislike tariffs and will try to avoid them if possible.
The Census Bureau’s October release seemingly points to this. Business inventories met analysts’ expectations, rising 0.1% m/m, while September’s figure was downwardly revised to flat.[v] Slight growth, but inventories are always tricky—growth can mask weak demand. But that wasn’t the case here. Demand stayed firm and businesses added inventories, albeit only slightly—the Census Bureau’s inventory-to-sales ratio, which measures roughly how many months it would take for businesses to clear their shelves, remained at its long-term average of 1.37.[vi]
Could America’s corporations be acting in anticipation of Trump’s potential tariffs? Possibly, and October’s data don’t seem to suggest otherwise. That said, November and December’s data will shed some more light on it—alongside management commentary in future earnings releases—given they will cover the post-election period and not just a time when a Trump victory started gaining likelihood as polling narrowed.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.
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