US Retail Sales Rose: Are They Supporting the Economy?

US retail sales rose in December

According to data provided by the United States Census Bureau, US retail sales gave a strong performance in December 2016, rising 0.6% compared to the 0.2% rise in November 2016. However, it didn’t meet the market’s expectation of a 0.7% rise. Overall in 2016, US retail sales increased to 3.3%, while they stood at 2.3% in 2015.

US Retail Sales Rose: Are They Supporting the Economy?

This rise was mainly due to the increased sales of motor vehicles, building materials, and furniture. Sales of building materials rose 0.5%, sales of motor vehicles rose 2.4%, and sales of non-store retailers rose 1.3%. Sales of healthcare and personal care stores rose 0.3% in December 2016.

Economic impact

The rise in retail sales in the US (QQQ) (SPY) (SPXL) signifies that consumer spending is rising. Remember, consumer spending is one of the most important drivers in the US economy and indicates that consumers are optimistic.

Improvements in job creation and wage growth also provide confidence to the US economy (IVV) (IWM) (VFINX). However, the December figure is slightly below market expectations.

If the US economy experiences further rises in retail sales, as well as a rise in inflation for three or four months straight, we can assume that the economy (QQQ) (SPY) is showing strength. The inflation expectation is also rising in the economy (VOO). Many market participants expect that this rise in inflation expectations could be a major market driver in 2017.

In the next part of this series, we’ll analyze the performance of the US consumer sentiment index in January 2017.