Report Shows Strong Start to U.S. Retailers’ Holiday Season

Report Shows Strong Start to U.S. Retailers’ Holiday Season
By JAVIER C. HERNANDEZ
Copyright by The New York Times
Published: December 11, 2009
http://www.nytimes.com/2009/12/12/business/economy/12econ.html?adxnnl=1&hpw=&adxnnlx=1260554444-KdDC1eqFDvr96whvVB7Spw


A strong start to the holiday shopping season helped push retail sales up nearly twice as much as expected in November, the government said Friday, signaling that consumers may be opening their wallets even in the face of a grim job market.

From personal health stores to electronics boutiques, sales were up last month, rising 1.3 percent over all from October, seasonally adjusted. Excluding cars and gasoline sales, which can be volatile, the jump was 0.6 percent, three times as high as economists had predicted.

Friday’s figures brought relief to many business owners, who had feared consumers would rein in spending this year as unemployment crept to double digits and the recovery showed signs of weakness. The data reinforced the expectation of modest growth in consumer spending over the next several months, economists said, though sales alone will probably not increase fast enough to lift the economy out of its downturn.

A separate gauge of consumer confidence released Friday added to hopes of a turnaround in consumer behavior. The University of Michigan’s monthly barometer registered its first increase in three months and far outpaced expectations.

“The momentum here is positive,” said James F. O’Sullivan, chief economist for MF Global. “We’re seeing that better spending leads to a better job market which leads to better spending, in stark contrast to the downward spiral we were seeing a year ago.”

The picture of consumer spending in 2008 was far dimmer: sales took a steep plunge toward the end of the year, dipping below $340 billion, as the nerves of the financial crisis came to the fore. While sales reached $352.1 billion last month, the economy still has much ground to regain: spending was as high as $380 billion in 2007.

Spending by consumers makes up more than two-thirds of the economy, and some analysts think recovery will not come until Americans start buying again. That may be difficult in a country where at least 15.4 million people remain unemployed, many of them for more than six months, and as many families struggle with meager paychecks and reduced hours.

“The difficulties in the labor market, the desire to reduce and the tightening of lending standards of all kinds should serve to cap the pace at which spending will rebound in 2010,” Dan Greenhaus, chief economic strategist for Miller Tabak, wrote in a research note Friday.

The retail sales figure reflected a 1.9 percent increase from November 2008, when the chill in consumer spending had begun to take hold — the first year-over-year increase since August 2008, economists said.

Sales of cars and gasoline led the strong gains over all, though sales were up for goods of all types — food, electronics, garden supplies, sporting goods. Cars and car parts rose 1.6 percent, even in the absence of government incentives like the cash-for-clunkers program, and gasoline sales increased 6 percent, pushed up by rising prices. Mail and Internet orders rose 1.2 percent, while clothing sales declined by 0.7 percent.

Retailers generally reported small crowds on Black Friday, the day after Thanksgiving that is the traditional start to the holiday shopping season. But data released earlier this month showed that online retailers, electronics stores, jewelry stores and appliance stores all posted gains compared with last year’s lackluster season.

In its report, the Commerce Department revised its October data, saying sales increased by 1.1 percent rather than the 1.4 percent originally reported. The government adjusts its sales numbers to discount the boom from holiday shopping, but economists said the lure of holiday deals still helped bring consumers to the cash register.

The University of Michigan’s consumer sentiment index reached 73.4 in early December, an increase of 6 points, as Americans looked brightly on the slowing pace of job losses and were encouraged by deep discounts from retailers.

But Paul Dales, an economist for Capital Economics in Toronto, cautioned the numbers were “nothing to get too excited about,” and he noted confidence levels remain far below the historical average of 86.6.

There were also indications of economic renewal on the business side. A government report showed that businesses increased their inventories in October, after more than a year of cutting back. The gain was a modest 0.2 percent, but analysts believed inventories would decline by that same amount. Any increase means businesses are restocking their shelves, which stimulates factory production and creates jobs.

“If firms decide to stop cutting inventories all together, that’s going to be a huge boost to growth,” said Haseeb Ahmed, senior economist at JPMorgan Chase. “If that happens, you don’t really need anything beyond modest growth in consumer spending for a sustainable recovery.”

A report on United States imports and exports released Friday showed signs that vast stimulus efforts worldwide are causing increases in prices. The Labor Department said the price of imports rose 1.7 percent in November, the fourth consecutive month of gains, largely because of increasing fuel prices.

Still, the Federal Reserve has said that inflationary pressures remain in check and that it does not expect inflation to emerge as a threat to economic stability, even as interest rates remain close to zero.