November retail sales signal strong holiday shopping season

Dec. 14 (Bloomberg) -- Sales at U.S. retailers rose more than forecast in November as holiday shopping got under way, a sign consumers will play a bigger role in the recovery. Purchases increased 0.8 percent, following a 1.7 percent gain in October that was larger than previously estimated, Commerce Department figures showed today in Washington. The November producer price index also increased 0.8 percent from the prior month after a 0.4 percent rise, according to a separate Labor Department report. Bloomberg's Michael McKee reports. (Source: Bloomberg)
Charting retail sales through November
By Ylan Q. Mui
Washington Post Staff Writer
Tuesday, December 14, 2010; 4:42 PM

New government data released Tuesday bolstered retailers' hopes that consumers are shaking off the recession and pulling out their wallets just in time for the most critical sales months of the year.

The Commerce Department reported a 0.8 percent increase in retail sales in November from the previous month, with big gains at clothing stores, sporting goods chains and department stores. It also revised its estimate for October upward, from a 1.2 percent gain to 1.7 percent.

The strong results, combined with the recent stock market rally, prompted an influential industry trade group to raise its holiday sales forecast Tuesday. The National Retail Federation said it now predicts that November and December sales will grow 3.3 percent compared with last year, one percentage point higher than its original estimate.

"It's been a while since we've really seen the retail industry drive strong economic growth," NRF spokesman Scott Krugman said. "Pent-up demand is meeting discounts, creating better than expected results for the holiday season."

The holiday shopping season is a crucial period for retailers, accounting for 20 percent of their annual sales. As shoppers froze their spending in the wake of the 2008 financial crisis, retail sales plunged, forcing many chains to shutter stores or even go out of business. The industry has been struggling to right itself ever since.

Many retailers began to see signs of life during the back-to-school shopping season when consumers were lured to the malls by heavy promotions and pent-up demand. That continued last month as some retailers reported record sales in the days after Thanksgiving. Online sales hit a single-day high of $1 billion on Cyber Monday.

The new government data on Tuesday supported those anecdotal reports. Sales at apparel stores jumped 2.7 percent in November compared with the previous month, while department stores saw a 2.8 percent increase. Sales at sporting goods stores rose 2.3 percent, and online retailers increased sales by 2.1 percent.

The gains offset slight declines in auto sales and home-furnishing stores, which have been particularly hard hit by the falloff in the real estate market. Sales at electronics stores dropped by 0.6 percent, partly because of rapid price declines for flat-panel TVs.

"When there's a reason to shop, people are willing to go out to the stores," said Samantha Panella, a retail analyst with investment banking firm Raymond James. "We think this momentum should continue as we get closer to Christmas."

In fact, the International Council of Shopping Centers, a trade group, reported Tuesday that retail sales last week ticked up slightly after a short lull following the traditional post-Thanksgiving shopping blowout. And many retailers count the last Saturday before Christmas as the busiest day of the year.

But retail experts caution that the holiday cheer is not likely to last long into 2011. After the Christmas catalyst wears off, shoppers will still be facing a stubbornly high unemployment rate and tightened credit markets. BB&T retail analyst Andrew Wolf said that consumers' incremental gains in disposable income have not been large enough to maintain such robust spending.

"The good news is that it does prove the consumer is alive and not going to become a permanent saver," he said. But "to say it's sustainable at this rate is not wise."

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