TARIFFS FEARED

The solid increase in retail sales came despite a late Thanksgiving holiday that pushed Cyber Monday into December, and was consistent with a strong start to the holiday shopping season. Sales at auto dealerships jumped 2.6%, likely boosted by residents replacing motor vehicles damaged by Hurricanes Helene and Milton. Online retail sales vaulted 1.8%, probably reflecting early holiday promotions.

Receipts at sporting goods, hobby, musical instrument and book stores increased 0.9%. Building material and garden equipment store sales rose 0.4%, likely as residents rebuilt in areas devastated by Helene and Milton.

There were also decent gains in sales at electronics and appliance stores as well as furniture outlets.

But there were pockets of weakness and hints of belt tightening among some consumers, especially low-income households.

Though layoffs remain low, hiring has cooled down. Consumer debt loads are expanding.

Receipts at food services and drinking places, the only services component in the report, fell 0.4% after increasing 0.9% in October. Economists view dining out as a key indicator of household finances.

Sales at clothing stores decreased 0.2%. Grocery store sales also declined 0.2%. Sales at miscellaneous retailers, which include florists and gift shops, dropped 3.5%, extending the prior month's decline.

Nonetheless, consumers generally remain in good shape.

Retail sales excluding automobiles, gasoline, building materials and food services rose 0.4% last month after a 0.1% dip in October.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They rose 0.3% after adjusting for inflation. Growth in core retail sales averaged a 6.5% annualized rate in the last three months. Economists estimated that consumer spending was running at around a 3.0% pace so far in the fourth quarter.

Consumer spending grew at a 3.5% rate in the third quarter, accounting for most of the economy's 2.8% pace of expansion during that period. The Atlanta Fed is forecasting GDP increasing at a 3.1% pace in the fourth quarter.

"We expect households to keep spending into the new year, but for the pace of consumption to slow as the year progresses and tariff-related price pressure bites," said Shannon Grein, an economist at Wells Fargo. "While the broad household sector is still in a decent financial position today, data suggest consumers are growing more vulnerable amid slowing real income growth and still-high financing costs."

While consumers continue to carry the economy on their shoulders, manufacturing remains downbeat in part because of the lingering effects of the Fed's policy tightening and crippling strike by factory workers at Boeing.

Factory output increased 0.2% in November after a downwardly revised 0.7% decline in October, the Fed said. Economists had forecast production rebounding 0.5% after a previously reported 0.5% decrease.

Though the Boeing strike ended in early November, production of aerospace and miscellaneous transportation equipment fell 2.6%. That was attributed to declines in the manufacturing of aircraft parts, and followed a 6.7% tumble in October. It partially offset a 3.5% jump in motor vehicle and parts output.

Tariffs loom over the sector next year.

"The threat of tariffs on imported raw materials and intermediate goods likely will stimulate manufacturing output briefly, as firms seek to increase inventory and control costs," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.

"Nonetheless ... we think that heightened uncertainty over tariff and immigration policy will dissuade manufacturers from investing in additional capacity until the policy picture is clearer."