WASHINGTON – Retail sales rose for a fifth straight month in November, as the biggest jump in department store sales in two years gave the holiday shopping season a strong start.
Retail sales increased 0.8 percent last month, the Commerce Department said Tuesday. That came after a 1.7 percent gain in October, which was propelled by a huge increase in auto sales.
Auto sales retreated a bit in November. But excluding autos, sales rose 1.2 percent – the best showing since last March.
Department store sales jumped 2.8 percent, the strongest advance in two years. That supported private industry readings that this year’s holiday shopping season got off to a good start.
Still, Best Buy Co. reported Tuesday that its quarterly net income, which covered a three-month period ending on Nov. 27, fell more than expected. The company said it lost sales of TVs and laptops to competitors. It also cut its full-year outlook.
Shares of the largest U.S. electronics chain fell nearly 12 percent in premarket trading.
One benefit for shoppers is that inflation remains tame. The Labor Department reported that wholesale prices rose 0.8 percent in November, reflecting a jump in energy prices. But core inflation, which excludes volatile energy and food, rose only 0.3 percent.
Consumer spending is closely watched because it accounts for 70 percent of total economic activity. A drop in retail sales in May and June had raised fears that the economy could be in danger of slipping back into recession.
However, since that time, sales have posted five consecutive increases. Several economists said the strong gains in retail sales and the pending tax-cut package making its way through Congress were prompting them to revise up their estimates for consumption spending for the October-December quarter and the first part of 2011.
Theresa Chen, senior economist at Barclays Capital, said that the strong retail sales in both October and November had pushed her tracking estimate for consumer spending and overall economic growth up to 3.5 percent for the fourth quarter. That’s up from 3 percent prior to the strong retail sales report.
“The continued improvement in retail sales is indicative of a consumer that continues to gradually rebuild confidence that was shattered by the credit crisis,” said Jim Baird, chief investment strategist for Plante Moran Financial Advisors.
But Paul Dales, senior U.S. economist at Capital Economics, said that the current spending gains may not last unless job growth picks up.
“This tentative consumer revival may not be the start of a prolonged period in which households become the engine of the economy once again,” he said, noting that the weak job growth means personal incomes, after adjusting for inflation, are rising by less than 1 percent. That’s far below what is needed to support strong spending gains.
Hiring may not be too far away. A survey from the Business Roundtable, an association of CEOs of big U.S. companies, showed that 45 percent of executives say they expect their companies to add more workers over the next six months. That’s the highest percentage who have said they planned to add jobs since the survey began in late 2002.
For November, auto sales slipped 0.8 percent. But that came after a sizable 5.8 percent surge in October sales by auto dealers.
The rise in department store sales represented a solid rebound from a 0.9 percent drop in October.
Analysts said that heavy holiday discounting, which started as early as October, and an improving economy were helping to boost spending.
Even the weather was playing a part. The arrival of cold weather in November, after two months of unseasonably warm weather, helped to boost sales of coats and other cold-weather gear.
Retail sales also got a lift in November from a rise in gasoline prices. That pushed up sales at service stations by 2.7 percent.
Specialty clothing stores sales rose 2.7 percent, after a 1.2 percent gain in October. Sales at general merchandise stores, a category which includes big retail chains such as Wal-Mart and Target, increased 1.3 percent – an improvement from the 0.3 percent rise in October.
Sales were down in November at furniture stores, appliance stores and hardware stores.
The holiday shopping season accounts for as much as 40 percent of annual revenue and profits for retailers. In an effort to spur demand, many stores trotted out the Black Friday discount stickers on selected merchandise as early as late October.
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