BLBG: Retail Sales in U.S. Increase by Most in Five Months
Retail sales in the U.S. rose more than forecast in November as Americans bought cars and took advantage of discounts going into the holiday-shopping season.
Purchases climbed 0.7 percent, the most since June, after a 0.6 percent advance in October that was larger than previously reported, Commerce Department figures showed today in Washington. The median forecast of 83 economists surveyed by Bloomberg called for a 0.6 percent advance. Excluding cars, sales (RSTAXAGM) rose 0.4 percent, also more than projected.
Higher stock prices, rising home values and stronger job growth have helped buoy consumer sentiment, raising the odds that household spending will rebound this quarter from the weakest performance in almost four years. Nonetheless, companies such as Gap Inc. and Costco Wholesale Corp. (COST) aren’t taking chances as they mark down merchandise to spur demand.
“We’re getting a tailwind from lower gas prices, significant tailwinds from higher wealth through equities and real estate and last, but certainly not least, an acceleration in wages,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who accurately forecast the gain in retail sales. “We’re going in the right direction.”
Estimates in the Bloomberg survey ranged from gains of 0.2 percent to 1.2 percent. October’s reading was revised from an initially reported 0.4 percent increase.
Other reports today showed applications for unemployment insurance payments jumped last week and the costs of goods imported in the U.S. fell in November for a second month.
Jobless Claims
The number of claims for jobless benefits surged by 68,000 in the week ended Dec. 7 to 368,000, a two-month high, according to Labor Department figures. While there were no special circumstances last week, the data are difficult to adjust for seasonal swings during the holidays, a government spokesman said as the report was released to the press.
Import prices dropped 0.6 percent last month, matching the decrease in October, another Labor Department report showed. The decline was led by a 3.1 percent fall in fuel expenses that was the biggest since June 2012. Costs dropped 1.5 percent over the past 12 months.
Stock-index futures were little changed after the reports. The contract on the Standard & Poor’s 500 Index maturing this month rose less than 0.1 percent to 1,781.4 at 8:39 a.m. in New York.
Broad-Based Gain
Eight of 13 major merchant retailer categories showed increases last month. The gains were broad-based and included rising revenue at auto dealers, furniture stores, electronics shops and non-store retailers, including online outlets.
Sales at automobile dealers climbed 1.8 percent, the most since June, after gaining 1.1 percent in October, today’s report showed.
Industry figures this month showed auto purchases climbed to a 16.3 million annualized rate in November, the highest since May 2007, according to data from Ward’s Automotive Group. November deliveries rose 16 percent for Chrysler Group LLC from the same month last year, 14 percent for General Motors Co. and more than 10 percent for Toyota Motor Corp. (TM) and Nissan Motor Co.
Electronics sales are getting a lift from new Playstation and Xbox consoles that debuted last month. Sales of Microsoft Corp.’s Xbox One exceeded 2 million in its first 18 days on the market as the company took on Sony Corp. (SNE)’s PlayStation 4. The $499 Xbox One and the $399 PlayStation 4 each sold more than 1 million units in their first 24 hours in stores.
Growth Impact
Sales excluding merchants such as food services, car dealers, hardware stores and service stations -- the figure used to calculate GDP -- increased 0.5 percent in November after posting a revised 0.7 percent gain the prior month that was the biggest since July 2012. The figures may prompt some economists to boost consumer-spending forecasts for this quarter.
Demand at building-material stores increased 1.8 percent in November, the most since July, today’s report showed, indicating the rebound in housing is giving some companies a boost. Home Depot Inc. (HD), the largest U.S. home-improvement retailer, said yesterday it expects to meet a profitability goal a year earlier than planned as rising housing prices prompt an increase in renovations.
Today’s report also showed why some retailers reported disappointing sales. Demand at clothing stores fell 0.2 percent last month, while receipts at general merchandise stores rose 0.1 percent.
Black Friday
In the days after Thanksgiving, known as the Black Friday weekend, spending dropped for the first time since 2009, with merchants extending deep discounts, according to the National Retail Federation in Washington. The holiday-shopping period that runs through Christmas typically accounts for 20 percent of retailers’ annual profit, according to the group.
Store traffic plunged 10.2 percent in the week ended Dec. 7 compared with a 2.3 percent gain in the week after Thanksgiving a year ago, according to data from researcher ShopperTrak.
Business conditions remain “volatile and promotional,” putting pressure on profit margins, said Robert Hanson, chief executive officer of American Eagle Outfitters Inc. The Pittsburgh-based apparel retailer reported a 6 percent drop in Thanksgiving week revenue from the same period a year ago.
“We continue to operate in the most challenging sector of retail, where there has been intense promotional competition and tepid consumer spending,” Hanson said on a Dec. 6 earnings call. “2013 is not the year we’d planned for.”
Online Shopping
Conversely, online shopping surged about 20 percent to a record on Cyber Monday as consumers took to the Internet to buy gifts. Sales jumped 2.2 percent at non-store retailers, the biggest gain since July 2012, today’s report showed.
Improving stock prices and gains in hiring may also be driving retail demand. The Standard & Poor’s 500 Index is up 25 percent so far this year, and closed at a record on Dec. 9. Payrolls climbed by a more-than-forecast 203,000 workers in November and the jobless rate unexpectedly dropped to a five-year low of 7 percent, figures from the Labor Department showed last week.
Consumer sentiment climbed to a five-month high this month, easing concern household spending would retreat this holiday season, preliminary figures from Thomson Reuters/University of Michigan showed last week.
Rising consumer purchases will probably help propel economic growth this quarter after a surge in stockpiling boosted gross domestic product in the previous three months.
Consumer spending will climb at a 3 percent pace from October through December compared with a 1.4 percent gain in the third quarter that was the weakest since the end of 2009, according to a forecast by economists at Macroeconomic Advisers LLC in St. Louis. Last month’s gain in retail sales combined with more positive revised readings for prior months will probably prompt some economists to boost forecasts.
