November Retail Sales Stronger Than Expected
The U.S. economy showed signs of strength with the release of stronger-than-expected retail sales data Monday, helping to cement views that the Federal Reserve will raise interest rates again today.
The Commerce Department said retail sales rose 0.1% in November, compared with a Wall Street forecast for a 0.1% decline. On top of this, October was revised up sharply to a gain of 0.8%, versus the more modest 0.2% increase that was reported initially.
Business inventories, released by the Commerce Department, reinforced the impression of consumer spending gathering momentum in the fourth quarter with retail stocks advancing less than expected in October as sales grew.
“The [November retail sales] details were quite solid and the upward revision for October really puts the momentum on a strong footing for the fourth quarter,” said Kathleen Stephansen, director of global economics at CSFB.
“This only encourages the Fed further to raise rates by 25 basis points,” she said.
Economists scrutinize retail sales as a dominant component in consumer spending, which in turn makes up two-thirds of U.S. economic output. The numbers support other signs of a moderate expansion as oil prices eased from a peak above $55 a barrel in October.
Excluding autos, retail sales were up 0.5% compared with forecasts for a 0.3% advance and an upwardly revised 1.1% increase in October, signaling a solid start to the holiday shopping season.
On a 12-month basis, retail sales excluding autos have grown 8.6%.
Motor vehicle and part sales shrank 1.3%, but this performance had been anticipated after industry reports of a weak month amid signs that consumers were holding back in the hope of better bargains in December.
A later Commerce Department release showed that business inventories grew a smaller-than-expected 0.2% in October, with retailers emptying stocks at a rapid pace while their sales grew.
Analysts polled by Reuters had forecast a 0.6% rise in inventories versus September, which was revised to show no change after an initially reported 0.1% increase.
Growth in sales by manufacturers, retailers and wholesalers was stronger in October, advancing 1.2% after a 0.3% gain the previous month.
Economists see rising inventories either as a sign of confidence in future demand or as a result of an unexpected decline in sales.
Analysts look at the inventories-to-sales ratio to determine how to interpret the data.
This measure of the number of months it would take to deplete stocks at the current rate of sales declined to 1.30 months’ worth, revisiting the all-time low in May, compared with a revised 1.31 months’ worth in September.
