Consumer Pulls Back in November 

Rate hikes are accelerating the pivot on spending from goods to services. 

Meagan Schoenberger

Meagan Schoenberger

Senior Economist, KPMG Economics, KPMG US

+1 202-533-3000

Consumer spending fell on a seasonally adjusted basis in November by 0.6%, missing expectations for a smaller decline of 0.2%. This is down from October’s rebound of 1.3% as early holiday discounting and a temporary boost from Hurricane Ian pulled spending from November into October. 

Some of the largest declines were in areas affected most by rising financing costs. Motor vehicles and parts dealers saw a drop of 2.3% from October. Auto specialist Wards reported total vehicle sales of 14.1 million in the month of November, missing expectations by nearly 400,000 and down from 14.9 million in October. The pent-up demand many vehicle producers hoped would carry them appeared to evaporate, even after adjusting for the drop in prices for used and leased vehicles. Many lease buyers have abandoned brand loyalty or aspirational purchases and are now seeking value instead.  

Total retail sales except autos declined by a smaller amount—0.2%—as sales at online, furniture, electronics and building materials stores all showed declines. Black Friday and Cyber Monday deals in the month of November were not sufficient to offset early discounts. Nonstore retailers, or online stores, saw an increase of 0.7% in October when discounting was pushed earlier but posted a decline of 0.9% in the month of November. Brick-and-mortar retail did not do much better; department stores had declines of 2.9%. Sales of clothing, general merchandise and other consumer goods fell in the month of November, but with much smaller relative changes, especially considering the prices for those goods. The strongest performers were big-box discounters, which picked up market share as consumers sought better deals and pricing. 

Consumers kicked up their heels and spent more to dine out, entertain in their homes and drive during the Thanksgiving holiday. They also spent more on health and personal care stores, reflecting an increase in RSV, flu and COVID infections and separately, the desire to primp a bit more.


Bottom Line:

Early discounting in October and replacement demand juiced by Hurricane Ian pulled consumer spending from November into October and left many retailers wanting. Black Friday discounts were not enough to lure them back. Rate hikes are accelerating the pivot on spending from goods to services. Another drop in prices at the pump could help blunt the blow a bit in December but consumers are expected to pull back more aggressively by Spring 2023. 

Consumers are expected to pull back more aggressively by Spring 2023.