The American shopper continues to prove naysayers wrong, as retail sales have once again defied expectations. Economists are predicting a 0.4% increase in retail sales for December, according to FactSet consensus estimates. This reflects the surprising strength of shoppers during the holiday season. November already saw a 0.3% increase, surpassing initial predictions.

The estimate for December aligns with the findings from the National Retail Federation's monthly retail monitor. It shows that total retail sales rose by 0.4% month-over-month and by 3.1% annually in December.

NRF President and CEO Matthew Shay expressed satisfaction with the numbers, stating, "December's numbers combined with November's results show retailers had a very successful two-month holiday season."

Leading up to the holidays, there were concerns about the impact of macroeconomic volatility and higher interest rates on consumer spending. Many retailers expressed caution in their third-quarter earnings reports.

However, early indications suggest that the holiday season met or exceeded expectations, leaving room for the possibility of the report surpassing consensus estimates. Citibank economists, led by Gisela Hoxha, believe that the headline number could reach 0.5%, driven by real growth in consumer spending.

Retail Sales Show Solid Growth Heading into December

According to experts, retail sales are expected to see continued growth in December, supported by a strong labor market and increasing incomes. While there are some signs of weakness beneath the surface, overall consumer spending remains healthy.

Bank of America's economics team predicts a potential rise of 1.2% in December sales compared to November. However, this increase may be influenced by changes in seasonal adjustments by the Census Bureau rather than a significant surge in spending. The team emphasizes that while spending is robust, it is not experiencing an extraordinary boost.

The projected figures for December retail sales align with or exceed the expectations of most economists regarding holiday sales. The National Retail Federation (NRF) anticipated a growth rate of 3% to 4% for this year's festive season.

Although this forecast represents a lower growth rate compared to previous holiday seasons, it remains a solid and promising figure. It is consistent with pre-pandemic levels and falls within the range that the Federal Reserve considers ideal for achieving a soft landing.

Luke Tilley, chief economist at Wilmington Trust, highlights the importance of a continued slowdown in consumer spending for a successful soft landing. As the Federal Reserve monitors economic developments, such stability is crucial.

In summary, retail sales are poised for solid growth in December, with promising prospects for the holiday season. The combination of a robust labor market, increasing incomes, and steady consumer spending indicates steady progress towards economic stability.

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