Synopsis:

CIBC highlights that the U.S. retail sales report for October indicates a cooling of consumer spending, aligning with expectations. The report suggests that while there's a moderation in growth, the previous month's figures were adjusted upwards, showing continued economic activity into the fourth quarter.

Key Points:

• Moderate Growth: Retail sales control group, relevant for GDP calculations, increased by 0.2% month-over-month, suggesting continued, albeit slower, consumer spending growth.

• Total Retail Sales Dip: Overall retail sales saw a slight decrease of 0.1% month-over-month, better than the anticipated 0.3% decline, pointing to a resilient consumer base.

• Interest Rate Impacts: Categories sensitive to interest rates, such as vehicle sales, furniture, and building materials, experienced downturns, reflecting the broader economic cooling due to rate hikes.

• Positive Real Spending: Despite the overall slowdown, real spending in control group categories showed an increase, contributing positively to economic momentum.

• Forward Outlook: CIBC forecasts that while current consumption momentum is strong, the rebalancing labor market and slower income growth may lead to more conservative consumer spending patterns ahead.

Conclusion:

CIBC's analysis suggests that while U.S. retail sales in October have cooled, there is still sufficient economic momentum to carry through into the final quarter of the year. However, caution is warranted as the effects of a shifting labor market and the eventual impact of slower income growth may dampen consumer spending in the future.