Retail Sales Increase 0.3% in November as Pump Prices Fall

Retail sales posted a moderate increase in November as plunging gasoline prices left consumers with money to spend at the mall.

The Commerce Department reported that retail sales rose by 0.3% last month, slightly weaker than the 0.4% increase that analysts had been forecasting.

Economists generally saw the increase as a positive sign for retailers, which so far have posted mixed results in the all-important holiday shopping season.

“Christmas sales are shaping up to be OK,” said Mark Zandi, chief economist at Moody’s Economy.com. He predicted this year’s Christmas sales would be about 6% higher than 2004.

Nigel Gault, an economist at Global Insight, another forecasting firm, said retailers would have “not a blockbuster holiday season but far better than it appeared a couple of months ago when gasoline prices were over $3 per gallon.”

Consumer confidence is being bolstered by falling gasoline prices and stronger job growth after a two-month hurricane-induced lull.

But even with good Christmas sales, economists cautioned that consumer spending, which has been a driving force in the current economic expansion, was set to slow significantly in the fourth quarter, primarily reflecting a slowdown in auto sales after attractive summer discounts led to robust sales.

For November, auto sales rose by 2.6%. However, that increase followed sizable declines in auto sales over the previous three months after a big jump in July, when automakers offered the general public the same sales incentives they gave their employees.

In a second report, the Commerce Department said American businesses increased their inventories by 0.3% in October, following a gain of 0.5% in September. That gain was slightly below the 0.5% rise in inventories economists had expected.

Analysts are looking for strong rebuilding of stockpiles to support overall economic growth in the October-December quarter. Even with the October inventory rise, the number of months it would take to deplete stocks at the current sales pace remained at a record low of 1.25 months.

The 0.3% increase in retail sales in November followed a 0.3% gain in October, which was revised upward from an initial estimate that sales had fallen by 0.1% in October.

The strength last month came from the 2.6% jump in auto sales, an advance that followed declines of 11.7% in August, 3.4% in September and 1.3% in October.

Excluding autos, retail sales would have been down 0.3%, the biggest drop in 19 months.

However, much of that weakness reflected falling gasoline prices, with sales at gasoline stations dropping by 5.9%, the biggest one-month decline in this category in 2 1/2 years.