The US economy is showing signs of strength as wages, retail sales and home sales rise
FOX Business Grady Trimble details Varney & Co.
The latest economic data shows signs of growing strength on Main Street, as Americans’ take-home pay rises and contributes to an increase in retail sales and home purchases – although some headwinds remain.
Data from the Bureau of Labor Statistics released last week shows that average weekly earnings increased by 1.42% compared to inflation from January to December 2025.
Retail spending rose 3.3% year-over-year in November and rose 0.6% from the previous month after October’s data was revised down to a 0.1% monthly decline, according to Census Bureau data released this week.
Those figures were slightly stronger than the expectations of economists polled by Reuters, who forecast a 0.4% rise in November after being unchanged as previously reported.
Low interest rates contributed to inflation selling at homeas the National Association of Realtors (NAR) reported Wednesday that existing home sales rose 5.1% in December amid a recent drop in mortgage rates.
FINANCIAL RATES DROP TO LOWEST LEVEL SINCE 2022
The latest economic data showed signs of strength on Main Street despite some headwinds. (Stefani Reynolds/AFP via Getty Images/Getty Images)
Average 30 year fixed rate mortgage it was 6.19% in December, according to Freddie Mac. That number represents a decrease from 6.24% in November and 6.72% last year.
NAR chief economist Lawrence Yun said in a statement that while “2025 was another difficult year for homebuyers, marked by high home prices and historically low home sales,” housing market conditions began to improve in the fourth quarter “with lower mortgage rates and slower home price growth.”
“Inventory levels remain strong,” Yun said. “With few sellers feeling eager to move, homeowners are taking their time deciding when to list or sell their homes. Similar to previous years, more properties are expected to hit the market starting in February.”
INFLATION UNSTABLE IN DECEMBER, STAYING WELL ABOVE FED’S 2% TARGET
Retail sales rose 0.6% on a monthly basis in November, according to data from the Census Bureau released this week. (Stefani Reynolds/AFP via Getty Images)
Inflation also appears to have slowed, although the Bureau of Labor Statistics’ consumer price index (CPI) showed that inflation remained high by the end of 2025.
The CPI report for December showed that inflation increased by 0.3% month-on-month in December and was up 2.7% from a year ago.
Core CPI, which excludes variable measures of food and energy prices, up 0.2% in December and up 2.6% over last year.
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Home sales rose at the end of the year with favorable mortgage rates. (Lindsey Nicholson/UCG/Universal Images Group via Getty Images)
Those figures are always more than The Federal Reserve The 2% long-term inflation target has also put central bank policymakers in the difficult position of balancing their dual mandate of stable prices and high employment between persistent inflation and a sluggish labor market.
The Fed has lowered its federal funds rate by 25 basis points at each of the past three meetings, indirectly contributing to the low levels of borrowing that are heavily influenced by bond markets.
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The market expects the Fed to avoid a rate cut when policymakers hold their next meeting at the end of January, with the CME FedWatch tool showing a 95% chance that the fed funds rate will remain in the current target range of 3.5% to 3.75% after the meeting.
Reuters contributed to this report.
