The American consumer remains an unstoppable force. November retail sales rose a better-than-expected 0.6%, the Commerce Department reported Wednesday, confirming that shoppers kicked off the holiday season with enthusiasm even as surveys continue to show elevated economic anxiety.

The report, delayed more than a month due to a 43-day government shutdown, exceeded all forecasts. Economists surveyed by Econoday had expected sales to rise just 0.2%, with estimates ranging from a decline of 0.5% to a gain of 0.4%. Instead, consumers delivered growth that trounced even the most bullish projections.

The Gloomy-But-Spending Paradox

The disconnect between consumer sentiment and consumer behavior has become one of the most discussed phenomena in economic circles. Polls consistently show Americans feeling pessimistic about the economy, yet spending data tells a completely different story.

"Consumers are gloomy, but they are still spending. The only areas they are pulling back in are home improvement, home furnishings and some electronics and appliances. Outside of those areas, consumers continue to spend and they are likely to keep that up in early 2026 as they receive larger-than-normal tax refunds."

— Heather Long, Chief Economist, Navy Federal Credit Union

This paradox has significant implications for investors and businesses alike. Betting against the American consumer has been a losing trade for years, and the November data suggests that trend continues.

Where Americans Are Spending

Sales rose across most categories as the holiday shopping season got underway. The biggest gains came from specialty shops (up 1.9%), gas stations (up 1.4%), and home improvement stores (up 1.3%).

November Retail Sales by Category

  • Specialty shops: +1.9%
  • Gas stations: +1.4%
  • Home improvement stores: +1.3%
  • Control group (ex-volatile): +0.4% vs. -0.1% expected

Spending was down in only two categories: furniture stores edged down 0.1% from October, while department stores fell sharply by 2.9%. The department store decline reflects the continued structural shift toward e-commerce and specialty retail that has pressured traditional anchors for years.

The Control Group Beat

Perhaps most impressive was the control group measure, which strips out volatile components like autos and gasoline. This metric rose 0.4% in November, crushing economists' expectations of a 0.1% decline. The control group is watched closely because it feeds directly into GDP calculations, suggesting consumer spending will contribute meaningfully to fourth-quarter growth.

Why Spending Keeps Defying Expectations

Several factors help explain why consumers continue to spend despite expressing economic pessimism in surveys:

Labor market strength: Despite headlines about tech layoffs and hiring slowdowns, the unemployment rate remains near historic lows. Workers who have jobs are spending their paychecks.

Wage growth: Real wages have been rising as inflation moderates, giving consumers more purchasing power than they had during the high-inflation period of 2022-2023.

Wealth effects: Record stock prices and rising home values have boosted household net worth, making consumers feel financially secure enough to spend.

Credit availability: Despite higher interest rates, credit remains widely available, allowing consumers to finance purchases when cash isn't immediately available.

The Tax Refund Tailwind

Looking ahead, economists expect consumer spending to remain robust in early 2026, boosted by larger-than-normal tax refunds. Analysts at Wells Fargo Investment Institute project $517 billion in tax refunds will be issued this year—the largest refund year since 2017, excluding pandemic-era stimulus payments.

This cash infusion should provide a significant boost to first-quarter spending, particularly in categories like electronics, home goods, and discretionary services.

GDP Implications

Consumer spending accounts for roughly two-thirds of U.S. economic activity, making retail sales a crucial indicator for overall growth. The Atlanta Federal Reserve is currently forecasting GDP increased at a 5.1% annualized rate in the fourth quarter, with consumer spending driving much of that expansion.

The strong November retail report supports that outlook and suggests the economy entered 2026 with significant momentum despite persistent pessimism in sentiment surveys.

What It Means for Investors

For equity investors, the retail sales data reinforces the case for consumer discretionary stocks. Companies serving the American consumer continue to benefit from spending trends that have proven remarkably resilient.

However, the data also suggests that betting on an imminent consumer pullback—a popular trade among bears—remains premature. Those positioned for a sharp decline in consumer spending may face continued losses as Americans keep opening their wallets.

The Bottom Line

The November retail sales report provides further evidence that the American consumer remains the most reliable engine of economic growth. Despite elevated anxiety in surveys and persistent media narratives about economic weakness, actual spending behavior tells a story of confidence and resilience.

As long as the labor market remains healthy and real wages continue growing, there's little reason to expect a dramatic shift in consumer behavior. The gloomy-but-spending paradox looks set to continue well into 2026.