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Economy in Brief

U.S. Retail Sales Revive As Discretionary Spending Improves
by Tom Moeller December 11, 2009

The consumer looks to be gaining strength after earlier torpor. Retail sales last month rose 1.3% after a downwardly revised 1.1% increase during October. The latest increase was stronger than the 0.7% Consensus expectation and it moved the y/y change in sales into positive territory for the first time since August of last year. Moreover, spending on "core" retail sales has improved. Month-to-month changes in overall sales in recent months have been quite volatile due to auto sales promotions and rising gasoline prices. Aside from these distortions, gains in consumer spending have been steady during the past several months. The retail sales data are available in Haver's USECON database.

Auto sales recently firmed after earlier weakness. Last month, motor vehicle sales rose 1.6% after the 7.1% jump during October. Though the y/y change improved further into positive territory, sales were still 23% below the 2007 high. Less autos, sales jumped 1.2% aided by higher gasoline prices. That increase compares to an expected 0.4% increase. Higher gasoline prices lifted November fuel expenditures by 6.0% m/m and by more than one-quarter since December. Nevertheless, without autos & gasoline retail sales still rose by 0.6% last month, the third firm gain in the last four months. These gains raised the y/y change to 0.4% from -4.5% as of July.

Improvement in discretionary "core" spending was evident in the latest data. Sales at general merchandise stores rose 0.8% (1.8% y/y) during November and roughly matched the firm gains during the prior three months. The worst of spending in this area was reached during July when sales were down 3.6% y/y. Sales of electronics also increased 2.8% (-3.4% y/y) last month following three months of firm increase. Elsewhere last month, discretionary retail sales were weak. Furniture store sales fell 0.7% (-7.9% y/y) and have fallen steadily since early 2007. In soft goods, apparel store sales fell 0.7% after a revised 0.2% October downtick that previously was reported as an increase. Nevertheless, the y/y change improved to 0.9% from the 9.7% decline at the end of last year. 

Internet and catalogue purchases were quite firm last month. The 1.2% (8.1% y/y) increase was the fifth strong monthly increase in the last six and the y/y gain contrasted with a 7.6% decline as of April. Restaurant sales rose 0.5% (-0.2% y/y) after falling slightly during the prior five months. Finally, building materials sales reversed the prior months decline and rose 1.5% (-9.3% y/y).

Employment Projections: 2008-2018  from the Bureau of Labor Statistics can be found here 

  November October September Y/Y 2008 2007 2006
Total Retail Sales & Food Services (%) 1.3 1.1 -2.0 1.9 -0.8 3.3 5.3
  Excluding Autos 1.2 0.0 0.7 1.3 2.5 3.9 6.3
    Non-Auto Less Gasoline 0.6 0.1 0.6 0.4 1.6 3.6 5.7
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