Retail sales rose the most in five months in November, according to government data released Thursday, the latest in a string of positive economic reports.
The 0.7 percent increase surprised analysts and was an unexpected dose of holiday cheer for retailers, who have had a sluggish year so far.
November’s increase was because consumers feel more confident spending money, analysts said, but that optimism could be short-lived. Some Americans’ wallets are likely to be squeezed by a combination of factors early next year, analysts said.
Although a proposed budget deal would avert a government shutdown in January, it is also expected to cut unemployment insurance for millions of Americans, analysts said. Some tax refunds — a valuable source of spending money for many households — could be delayed because of the October shutdown. Finally, as the Affordable Care Act takes effect, some people will face higher health costs.
Consumer confidence took a beating during the government shutdown, but it is slowly coming back, economists say. Strong reports on the job market and the nation’s economic growth rate helped buoy confidence, said Lindsey Piegza, chief economist at Sterne Agee. But that won’t be enough for the new year, she warned.
“Consumers will need sustained job creation and income growth, which unfortunately do not go hand in hand,” she said.
Thursday’s report showed that total retail sales rose 0.7 percent from the previous month and that October’s estimate was increased to 0.6 percent. Sales were up 4.7 percent from the same time last year. Excluding automobiles, which influence the overall numbers, sales rose 0.4 percent. But clothing sales dropped 0.2 percent from the previous month, and department store sales posted a small increase of 0.3 percent.
Deep discounts and cheap financing, including for automobiles, lured shoppers to buy big-ticket items such as vehicles, appliances and furniture, analysts said. Among the retail sectors, auto sales had the strongest increase in November, up 1.8 percent from the previous month, according to the Census Bureau report.
“The threat of rising interest rates is still an overhang,” Piegza said. “Anyone who is on the fence about making big purchases is going to do that sooner rather than later.”
Despite the strong report, the outlook for the rest of the shopping season remains modest, said Chris Christopher, senior economist at IHS Global Insight.
The holidays are a crucial time for retailers because the businesses get as much as 40 percent of their sales during this period. A slow back-to-school season and volatile consumer sentiment have made this holiday season more important than ever. Retailers rolled out sales earlier as they tried to make the most of the shortest holiday season in more than a decade. There are six fewer days between Thanksgiving and Christmas than there were in 2012. Most big stores opened on Thanksgiving, hoping to attract crowds with early discounts. But an initial report by the National Retail Federation showed that Americans spent less at stores compared with last year.