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Retail sales increase for start of the holiday season

Strong gains in autos and gasoline drove a 1.3% increase from October, but excluding those categories, retail sales still rose 0.6%. November sales also were up 0.2% from a year earlier.

December 12, 2009|By Ylan Q. Mui
  • A shopper hits the Beverly Center mall in Los Angeles. Retail sales rose in November, the Commerce Department says.
A shopper hits the Beverly Center mall in Los Angeles. Retail sales rose… (David McNew / Getty Images )

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

Total retail sales rose 1.3%, the Commerce Department reported, though much of the increase was driven by strong gains in auto and gasoline sales. But excluding those categories, retail sales still rose a solid 0.6% in November from the previous month. Retail sales also increased on an annual basis, up 0.2% from a year earlier.

"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 retailers, including Costco Wholesale Corp. and J.C. Penney Co., 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% in November from a month earlier, fueled in part by strong demand over the Thanksgiving weekend. The building stores category rose 1.5% as home sales have slowly begun to improve. The non-store retailers category, which includes online stores and catalogs, gained 1.2%.

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

November is critical for retailers because it kicks off the holiday shopping season, which can account for the bulk of a store's sales. Economists said that 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 buy big-ticket items.

An RBC index of consumer sentiment showed increasing optimism about near-term economic conditions. The index rose to 39 this month from 30.2 in November. 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' consumer confidence 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 last month through aggressive promotions on merchandise as diverse as toys, turkeys and BlackBerrys. Massive crowds hunted for deals on Black Friday, though the average amount spent per shopper fell 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 Assn., a trade group.

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

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

Mui writes for the Washington Post.

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