Retail Sales Bounce Back in November; Recession Fears Ease

U.S. retailers’ sales rebounded in November, the government said today in a report analysts saw as showing stronger than expected Christmas buying and less chance of a recession.

The 0.8% increase, the biggest in four months, “clearly signals that the economy is resilient,” said Richard W. Rahn, chief economist for the U.S. Chamber of Commerce. “Fears of a poor Christmas retail season should abate with this report.”

“It’s clearly stronger than was expected,” said David Jones, an economist with Aubrey G. Lanston & Co., a New York government securities dealer. “As long as spending holds up, there’s no threat of a recession.”

The Commerce Department said that sales rose to a seasonally adjusted $144.6 billion in November after plummeting 1.3% in October, when they were driven down by skidding automobile sales. The October sales were revised after originally being reported to have fallen 1%.

Many economists were expecting only a weak improvement in November since unit car sales fell again in that month.

Sandra Shaber, an economist with the Futures Group in Washington, said the 0.5% increase in the automotive category probably reflected an increase in prices, not sales. Excluding the auto category, the report was even more positive, showing a 0.9% advance.

Jones suggested a shift in Christmas present buying patterns might have contributed to the November strength and might mean more moderate growth this month.

“We’re getting more and more spending in the last week of November and less in the first weeks of December,” he said. “The way to measure the Christmas season now is to average the November and December spending patterns.”

And Shaber added, “It’s taken a lot of price-slashing to get those sales. So even if dollar sales are decent this Christmas, it’s unclear whether the profits will be so great.”

Retail sales account for about one-third of the nation’s economic activity. David Wyss, senior financial economist for DRI/McGraw-Hill in Lexington, Mass., said the stronger November report caused him to boost his estimate of overall growth.

Wyss said if strong sales continue in December, the gross national product could increase at a 1% rate in the final quarter of the year instead of the 0.5% he had been predicting.

“This relieves the worries that the fourth quarter could turn into a negative quarter,” he said.

Not all analysts were as upbeat, however. Bruce Steinberg, senior economist at Merrill Lynch Capital Markets in New York, pointed out that sales in both September and October had been revised downward.

“I don’t think we are going to have a recession, but it is still iffy,” Steinberg said.

There had been concern that Christmas spending would be held back by a slowing economy, reflecting Federal Reserve policy of holding down inflation by tightening credit.

But even sales of durable goods--big-ticket items expected to last at least three years--posted a 0.7% gain after falling 3% in October. These sales often are affected by the Fed’s interest-rate policies because many are financed by loans.