Economic Growth Steady as Retail Sales Rebound Amid Tariff Concerns

U.S. retail sales rose significantly in November, driven by motor vehicle purchases and increased spending by affluent households. Despite this, economists express concern over the impact of high prices on lower-income consumers due to tariffs. The labor market's stagnation could further affect spending levels.

In November, U.S. retail sales experienced an unexpected rise, buoyed by higher motor vehicle purchases and broader spending, indicating sustained economic growth in the fourth quarter. Yet, economists raise alarms over growing income disparities as wealthy households lead spending, while low-income consumers feel the pinch of import tariffs and soaring food prices.

The Commerce Department's report highlights a 0.6% increase in retail sales, outperforming forecasts, with motor vehicle dealership receipts rebounding by 1.0%. The gains were also seen in building materials and sporting goods sectors, contrasted by a dip in furniture sales. Analysts expect challenges to persist despite forthcoming tax cuts, with modest gains projected across key sectors.

Amid these trends, the labor market's softening remains a concern as it may hinder spending growth. Experts note heightened spending by affluent consumers on luxury items while low- to moderate-income groups remain cautious. Proposed policy shifts, such as credit card interest rate caps, face opposition from banks, suggesting a bumpy road ahead for sustaining consumer momentum.

(With inputs from agencies.)