Retail Sales Probably Rose in November as Consumers Boosted U.S. Recovery

Retail Sales Probably Rose in November as Consumers Boosted U.S. Recovery

Retail sales probably climbed in November for a fifth consecutive month as Americans began their holiday shopping, showing consumers are playing a bigger role in the U.S. recovery, economists said before a report this week.

The projected 0.6 percent gain would follow a 1.2 percent October increase in purchases, according to the median of 62 estimates in a Bloomberg News survey ahead of Commerce Department figures Dec. 14. Other reports may show industrial production and homebuilding rebounded, while the cost of living held steady.

Chains like Target Corp. and Macy’s Inc. lured customers with discounts during the Thanksgiving weekend, the traditional kick-off to the busiest sales season of the year. While the world’s largest economy is speeding up heading into 2011, high unemployment and the risk of a prolonged drop in prices remain concerns for Federal Reserve policy makers meeting this week.

“The holiday season is running at a pretty strong pace,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia. “There’s a broad-based uptick in sales helped by aggressive discounts. The economy is improving but there are still many hurdles, such as the weak labor market.”

The National Retail Federation has forecast November- December holiday sales will rise by 2.3 percent from a year ago, the most since 2006. A Bloomberg survey taken Dec. 2 to Dec. 8 showed economists raised projections for consumer purchases, the biggest part of the economy, to 2.6 percent for next year, up from their 2.3 percent estimate the prior month.

Confidence Improving

Retailers will also benefit from consumer sentiment, which rose in December to the highest level in six months, according to a Thomson Reuters/University of Michigan report released last week. The optimism may be tied to stock market gains and President Barack Obama’s deal with Republican leaders to keep tax rates from rising next year.

Sales at stores open at least a year climbed in November by the most in eight months compared with a year ago, and beat analysts’ estimates, industry reports showed. Retailers began discounting earlier in the month than in the past few years and continued through Black Friday, the day after Thanksgiving.

Target and Costco Wholesale Corp. led the sales gains for discounters last month, while teen retailer Abercrombie & Fitch Co. and J.C. Penney Co., the third-largest U.S. department store chain, also posted better-than-forecast increases, according to company announcements.

Broad-Based Gains

Purchases are broadening out beyond holiday gifts and clothing. Home Depot Inc., the world’s largest home-improvement retailer, lifted its full-year profit forecast on stronger fourth-quarter demand for plumbing and electrical items.

“As we look at November into December, we see strength across the store,” Chief Financial Officer Carol Tome said Dec. 8 by telephone from an analysts’ meeting in Boston. The Atlanta- based company had a “terrific Black Friday.”

Investors have driven up retailer shares this year as spending accelerates. The Standard & Poor’s Supercomposite Retailing Index has gained 27 percent since Dec. 31, 2009, compared with an 11 percent advance for the broader S&P 500.

Sustaining demand may be hard without an improvement in the unemployment rate, which in November reached a seven-month high of 9.8 percent. Fed policy makers, due to hold their final meeting of 2010 on Dec. 14, may reiterate the strategy to buy an additional $600 billion of Treasuries through June to try to trim joblessness and avert deflation, or an extended drop in prices.

Prices Stable

Consumer prices rose 0.2 percent in November for a second month, according to the Bloomberg survey median ahead of a Labor Department report Dec. 15. Excluding food and fuel costs, core prices were up 0.6 percent from November 2009, according to the survey median, matching October’s rise that was the smallest year-over-year gain on record.

Among other reports, Fed figures on Dec. 15 may show production at factories, mines and utilities rose 0.3 percent in November after stalling in October, economists projected. The New York Fed’s Empire State manufacturing index, due the same day, and the Philadelphia Fed’s general economic gauge on Dec. 16 may indicate factories continued to expand this month.

Homebuilding, struggling to overcome a slump in demand and persistent foreclosures, grew in November following a drop in starts the prior month, Commerce Department data may show on Dec. 16. Rounding out the week, the Conference Board’s leading indicators gauge may reinforce evidence the economy is gaining momentum.

Bloomberg Survey

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Release Period Prior Median
Indicator Date Value Forecast
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Retail Sales MOM% 12/14 Nov. 1.2% 0.6%
Retail ex-autos MOM% 12/14 Nov. 0.4% 0.6%
PPI MOM% 12/14 Nov. 0.4% 0.6%
Core PPI MOM% 12/14 Nov. -0.6% 0.2%
Business Inv. MOM% 12/14 Oct. 0.9% 1.0%
CPI MOM% 12/15 Nov. 0.2% 0.2%
Core CPI MOM% 12/15 Nov. 0.0% 0.1%
CPI YOY% 12/15 Nov. 1.2% 1.1%
Ind. Prod. MOM% 12/15 Nov. 0.0% 0.3%
Housing Starts ,000’s 12/16 Nov. 519 550
Housing Starts MOM% 12/16 Nov. -11.7% 6.0%
Building Permits ,000’s 12/16 Nov. 552 560
Building Permits MOM% 12/16 Nov. 0.9% 1.5%
Philly Fed Index 12/16 Dec. 22.5 14.5
LEI MOM% 12/17 Nov. 0.5% 1.1%
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source: bloomberg.com