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Retail sales for December showed consumers continued to spend at a robust pace supported by solid growth in labor income amid a strong holiday shopping season.
However, a broadbased increase in retail spending may also reflect some stockpiling behavior ahead of potential trade wars, as consumers may foresee price increases if the proposed policies by the new administration are implemented. We expect consumer spending growth will decelerate later this year, albeit to a still solid pace.
Real retail sales of goods and food and beverage services rose by 4.1 percent annualized in Q4, on par with the robust reading in Q3, boding very well for overall real consumer spending and real GDP growth in the quarter. We estimate annualized real GDP grew at a solid 2.5% in Q4 2024.
Figure 1. Real Retail Sales suggest strong Q3 real consumer spending
Sources: Census Bureau and The Conference Board.
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