November retail sales beat expectations as gas prices fall
Retail sales rose more than expected in November as consumers took advantage of falling gasoline prices and an improving job market to go shopping.
The jolly report for the first days of the crucial holiday spending season adds to other indicators of growing economic strength.
In November, retail sales climbed to $449.3 billion, an increase of 0.7% from October and 5.1% from November 2013, the Commerce Department said Thursday. Some forecasts had pegged the monthly sales improvement at 0.4%.
In addition, the boost from September to October was revised up to 0.5%, from a 0.3% upswing.
“Most measures of confidence seem to be trending higher,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics. “It appears that consumers are getting the message and going out and spending.”
November’s growth — the largest in eight months — was bolstered by a strong 1.7% surge in sales from auto and other motor vehicle dealers. If that category is stripped out, retail sales grew by 0.5% — the same as for October.
Retail sales in November can be a crucial barometer of consumer sentiment and retail performance for the overall season — a make-or-break period when retailers can sometimes rake in 40% of their annual sales. Consumer spending makes up more than two-thirds of economic activity.
The healthy growth last month is welcome news for retailers who had seen sales drop 11% and traffic fall by more than 5% over the Black Friday weekend, according to the National Retail Federation. Analysts said earlier-than-ever promotions rolled out by nervous retailers had pulled some spending into early November.
The retail sales figures do not include Cyber Monday, which fell in December this year.
Electronics and appliance stores, always a popular category during Black Friday sales, showed a 0.9% increase. Department store sales were up 1%.
Furniture sales rose 0.5%. Consumers spent 1.4% more on building materials and garden supplies. In all, 11 out of 13 categories reported growth.
Shoppers got an especially big boost last month from falling gas prices. In Los Angeles, drivers are paying less than $3 a gallon for the first time in four years. Dropping pump prices around the country pushed sales at gas stations down 0.8%.
If gas prices continue to fall in 2015, drivers will save $100 billion on gas next year compared with 2013, according to Joseph Lake, U.S. analyst for the Economist Intelligence Unit. Half of that windfall will be spent instead of saved or used to pay down debt, he said.
“We expect the U.S. economy to grow by 3.3% next year, which would be the best performance for a decade,” he said.
Those savings, combined with signs of increased hiring, spurred consumers to spend more freely during their holiday mall trips, observers said.
The Labor Department reported last week that employers added more jobs than expected in November, and that the economy is on track in 2014 to create the most jobs since 1999. Average hourly wages for workers also showed the biggest gain in 18 months.
“The U.S. has now enjoyed 50 consecutive months of job creation, a record,” Lake said. “All this means that U.S. consumers have more money in their pockets to spend on goods and services.”
Barring another government shutdown or other event that could strangle the economy, consumers will continue to crowd the malls and shop online this holiday season. The National Retail Federation reaffirmed its forecast on Thursday that spending in November and December will rise 4.1% to $617 billion, up from 3.1% last year.
“Spending is on a positive trajectory,” said Hoyt of Moody’s Analytics. “This is good news for the holiday spending outlook.”
Twitter: @ByShanLi
