Retail sales brisk in November

Economists see consumer wariness despite 0.3% rise

A customer buys a video game at the Times Square Toys R Us store in New York in November. Retail sales rose 0.3 percent in November, the government said Thursday.
A customer buys a video game at the Times Square Toys R Us store in New York in November. Retail sales rose 0.3 percent in November, the government said Thursday.

— U.S. consumers shook off Hurricane Sandy last month and stepped up Christmas shopping, helped by a steady job market and lower gasoline prices.

Retail sales rose 0.3 percent in November from October, reversing the previous month’s decline. Sales increased mostly because Americans spent more online, bought more electronics and began to replace cars and rebuild after the storm.

And a sharp drop in gasoline prices muted the overall increase. Excluding gas stations, retail sales rose a solid 0.8 percent, according to a Commerce Department report released Thursday.

“We’re off to a fairly strong holiday-spending season,” said Millan Mulraine, senior U.S. strategist for TD Securities in New York, who correctly projected the November sales gain. “Consumer spending could offset some of the weakness” in other areas such as corporate investment, he said.

Some segments of the retail report were negative. Department store sales tumbled. And consumer confidence has slipped in recent weeks, which has raised concerns that some Americans may be growing worried about looming tax increases. That could dampen December sales. Many retailers depend on the two months of Christmas shopping for roughly 40 percent of their annual revenue.

High unemployment and weak wage growth have kept consumers cautious about spending, which accounts for 70 percent of economic growth. Most economists expect only slim gains in consumer spending in the final three months of the year, which should keep growth weak.

“Despite the positive numbers today ... we are not in a consumer-led recovery,” said Chris Christopher, an economist at IHS Global Insight.

A Labor Department report suggested that the job market is improving, which could set the stage for more spending next year.

Applications for unemployment benefits, which are a proxy for layoffs, fell by 29,000 last week to a seasonally adjusted 343,000. That’s the second-lowest total this year.

The drop indicates that companies are cutting fewer jobs and not yet panicking about the combination of tax increases and spending cuts set to take effect next month if President Barack Obama and Republican lawmakers fail to reach a budget deal before then.

Consumers are also seeing relief at the gas pump, which leaves them more disposable income. Gasoline prices have fallen almost 50 cents over the past two months, to a nationwide average of $3.30 a gallon, according to AAA. In Arkansas, the average price of a gallon of gasoline on Thursday was $3.10, according to AAA.

And a third report suggested that those declines will likely continue. Wholesale gas prices fell 10.1 percent in November, the Labor Department said. That’s the most in more than three years. It pushed down a measure of wholesale prices 0.8 percent, the most since May.

Economists saw mixed signals for the Christmas shopping season in the latest retail sales data. Online and catalog shopping surged 3 percent, the biggest gain in 13 months. But department store sales fell 0.8 percent. And Americans spent less at stores like Wal-Mart and Target.

And a survey last week found Americans’ confidence is weakening. Many are starting to worry about the “fiscal cliff.” Economists say that if those tax increases and spending cuts are not averted by a budget deal in Washington, D.C., the economy would slip into recession.

“With consumer confidence now falling, hopes that retailers would enjoy a robust holiday shopping season are fading,” Paul Dales, an economist at Capital Economics, said.

The season got off to a strong start over the long Thanksgiving holiday weekend. Shoppers went to stores and bought from websites in record numbers, according to a survey released by the National Retail Federation.

But since the Black Friday weekend, sales have been disappointing, analysts say. Some stores like Macy’s, hurt by Hurricane Sandy, have already extended promotions to make up for lost business.

Retailers are facing many of the same issues they faced last year. Budget-conscious shoppers who splurged over the Thanksgiving weekend are now holding out for better deals and waiting for their bank accounts to recover.

Information for this article was contributed by Martin Crutsinger of The Associated Press and Shobhana Chandra and Alexander Kowalski of Bloomberg News.

Business, Pages 25 on 12/14/2012

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