Implications: After robust gains the past couple months, retail sales grew at a more Plow Horse pace in November. However, nothing in today's sales report should stop the Fed from raising short-term interest rates by a quarter-point later today. Retail sales rose 0.1% in November following gains of 0.6% and 1.0% in October and September. In the past year retail sales are up a solid 3.8% but have been accelerating, up at a 5.1% annual rate in the past six months and at a 7.0% rate in the past three months. The biggest gain in November came from restaurants & bars. Outside of this sector, the small gains were broad-based, with nine of thirteen major categories showing growth in October. Sales at gas stations rose 0.3% in November and are now up 4% from a year ago. "Core" sales, which exclude autos, building materials, and gas, rose 0.2% in November and are up 3.7% from a year ago. Look for continued growth in consumer spending in the months ahead. Employment continues to expand, while wage growth is accelerating and consumer debt service obligations remain very low by historical standards. In the meantime, today's data suggest real GDP growth for the third quarter will be unrevised at a 3.2% annual rate. For the fourth quarter, we are tracking real GDP growth of around 2%. Watch for faster economic growth in 2017, however, as the overall policy mix from the government shifts in favor of faster growth.
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