Retail sales rise as shoppers get into holiday spirit
Surprisingly strong November results boost hopes for recovery

By Ylan Q. Mui
Washington Post Staff Writer
Saturday, December 12, 2009

Retailers rolled out the discounts and shoppers pulled out their wallets in November, sending sales up more than 1 percent during the first month of the crucial holiday shopping season, according to government data released Friday.

Total retail sales rose 1.3 percent, the Commerce Department reported, though much of the increase was driven by strong gains in auto and gasoline sales. Excluding those categories, retail sales still rose a solid 0.6 percent in November from the previous month. Retail sales also increased on an annual basis for the first time this year, up 0.2 percent compared with a year ago.

"The two together suggest that we may be through the worst of this," said David Wyss, chief economist for Standard & Poor's. "It doesn't mean we're snapping back in a hurry. But at least we're not going down anymore."

The strong November results surprised some analysts after the tepid monthly sales figures from national chain stores that were released last week. Many continued to report sales declines, and several key stores, including Costco and J.C. Penney, performed worse than expected.

But Friday's report offers a much broader picture of the retail industry, and many categories that enjoyed increases were not captured in last week's data. Sales at electronics retailers, for example, jumped 2.8 percent in November from a month earlier, fueled in part by strong demand over the Black Friday weekend. Home-improvement stores rose 1.5 percent as home sales have slowly begun to improve. Nonstore retailers, which include online stores and catalogs, gained 1.2 percent.

"That's a solid outcome for sure," Tom Porcelli, senior economist at RBC Capital Markets, said of November's results. "But I also don't think it's a blowout."

November is a critical month for retailers because it is the kickoff to the holiday shopping season, which can account for the bulk of a store's sales. Economists said consumers are still wincing from the recession and that a robust recovery in spending remains unlikely. But shoppers also seem to be building confidence and are more willing to make big-ticket purchases.

Following a gloomy fall, an RBC index of consumer sentiment showed consumers growing increasingly optimistic about near-term economic conditions. The index rose from 30.2 in November to 39 in December. A year ago, it stood at just 15.3.

The investment firm's report was bolstered Friday by the unexpectedly strong preliminary results from the University of Michigan/Reuters' index. The index has risen to 73.4 so far in December, the second-best reading this year. The index for consumers' mood about current economic conditions rose to 79.1, the highest level since March 2008.

Retailers have tried to drum up excitement among shoppers over the past month through aggressive promotions on merchandise ranging from toys to turkeys to BlackBerrys. Massive crowds turned out to hunt for deals on Black Friday, though the average amount spent per shopper declined slightly.

"This is a very encouraging response to all the steps that retailers have taken to earn consumers' business," said Casey Chroust, executive vice president for retail operations at the Retail Industry Leaders Association, a trade group.

The results also give the industry momentum as it gears up for the sprint to Christmas. Wyss said he had initially anticipated flat sales this holiday season, but the drop in the national unemployment rate, the rise in consumer sentiment and November's encouraging results have convinced him to adjust his prediction upward.

"It's awfully hard to keep Americans away from shopping malls," he said.

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