US Consumer Spending Rises But Low Oil Caps Gains

A gauge of U.S. consumer spending rose solidly in November as the holiday shopping season got off to a fairly brisk start, suggesting enough momentum in the economy for the Federal Reserve to raise interest rates next week for the first time in nearly a decade.

The Commerce Department said on Friday retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 percent after an unrevised 0.2 percent gain in October.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Economists polled by Reuters had forecast core retail sales increasing 0.4 percent.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, surprisingly slowed in September and October. The moderation came despite a tightening labor market, which has started to lift household income.

The latest signs of strength in consumption support expectations that the Fed will raise its benchmark overnight interest rate from near zero when policymakers conclude a two-day meeting next Wednesday. The U.S. central bank has not raised rates since June 2006.

Overall retail sales increased only 0.2 percent in November as automobile sales fell and cheaper gasoline weighed on receipts at service stations.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza