US retail sales rose for a fourth consecutive month in December, reinforcing the relative strength of US consumers. Consumer demand has contributed to solid US economic growth over the past year, which has put the US Federal Reserve Board (Fed) on a relatively gradual path to cutting interest rates. Sales were relatively broad-based in December, suggesting demand was robust to close out the holiday season.

• Retail sales in the US increased by 0.4% in December, marking the fourth straight increase. However, this was slower than the upwardly revised 0.8% increase in November and missed the 0.6% economists had expected, based on a Bloomberg survey.
• Retail sales growth was relatively broad-based. Sales grew at gasoline stations, sporting goods stores and furniture stores. Sales for motor vehicles and parts also increased in December but at a much slower pace than in November. On the other hand, sales fell at food services and drinking places.
• US consumers continue to demonstrate their relative strength. This comes in part due to a robust labour market, which has allowed consumers to brush aside concerns about tight financial conditions.
• Strong consumer demand has been a key contributor to relatively solid economic growth in the US. It has also contributed to elevated inflationary pressures. Now, the Fed could pause at its next meeting.

The strong US consumer has helped steady the US economy despite slower global growth and persistently tight financial conditions. Strong consumer demand was again evident over the holiday season. It is a much different situation than in Canada, where consumer demand began to fade in 2024, weighing on Canada’s economic growth. However, the Bank of Canada has rapidly lowered interest rates, which is expected to help reignite spending by both consumers and businesses.

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