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Retail Sales Plunge More Than Expected in November

U.S. consumers scale back on their purchases and limit holiday shopping as the coronavirus pandemic triggers new business restrictions and closures.

U.S. consumers dramatically scaled back on their purchases and limited holiday shopping in November as the coronavirus pandemic triggered new business restrictions and outright closures, snapping a six-month stretch of retail sales growth.

U.S. retail sales fell 1.1% to $546.5 billion last month, the Commerce Department reported on Wednesday, down from a revised negative 0.1% pace in October. Economists polled by FactSet had been expecting a decline of 0.3% in November.

The decline marks the first month-over-month drop in the department’s measure of spending at stores, vehicle dealerships, restaurants and online since April. It also reflects a broader retrenchment in spending amid a second wave of Covid-19 infections as well as stalling employment and broader economic growth.

It further reflects cautiousness among consumers to open up their wallets and spend - in person or from home - as the pandemic continues to affect not only peoples' health but their livelihoods. Excluding volatile auto sales, retail sales fell 0.9%.

"It’s truly the darkest before dawn with a brutal retail sales reading like this," said Mike Loewengart, Managing Director, Investment Strategy with E*TRADE Financial, noting the worse-than-expected numbers "paint a picture of the hard-hit consumer as we capture holiday shopping in November."

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Indeed, hiring growth slowed in November while worker filings for unemployment benefits recently increased - augmenting consumers' angst about spending money. Overall consumer spending, which includes retail and services consumption, has continued to increase, but more slowly than over the summer.

That is expected to reinforce the Federal Reserve's efforts to keep interest rates as low as possible, encouraging consumers and businesses to borrow and spend. 

Fed officials are widely expected to keep interest rates near zero when they wrap up their final policy meeting of the year on Wednesday, though Fed watchers expect policymakers to share their views on how the economy is progressing and what more they might be considering doing to pump additional dollars into the economy.

At the same time, expectations of a $900 billion, last-minute year-end stimulus deal from Congress could also buoy consumer confidence, and in turn spending, going forward.  

Senate Majority Leader Mitch McConnell, following a late-night negotiating session Tuesday with Democratic House Speaker Nancy Pelosi, told reporters he was "optimistic that we’re gonna be able to complete an understanding sometime soon.” Senate Democratic leader Chuck Schumer and House Minority Leader Kevin McCarthy also took part in the talks, as did Treasury Secretary Steven Mnuchin.