WASHINGTON – Jack Reed can see the recovery taking hold at his family’s 109-year-old clothing store in Tupelo, Mississippi, with sales buoyed in part by the paychecks tied to a Toyota plant up the road and rising confidence that the jobs are here to stay.
As retailers nationwide reported a brisk jump in November sales and optimism about the holiday season, Reed said on Thursday that the gears of the U.S. economy seemed to have finally meshed.
“There is just less fear from people who feel like they might lose their jobs … Our shoppers seem more confident than they did a year ago,” said Reed, 63, whose chain of four stores clocked a roughly 10 percent jump in sales from Thanksgiving to this week, compared to the year before.
In a rural area that counts Elvis Presley among its native sons, the drop in gasoline prices also was leaving more money in people’s pockets.
November’s retail advance showed the holiday shopping season was off to a strong start, and dispelled the gloom from a drop in Black Friday weekend commerce. Black Friday, the day after Thanksgiving, has traditionally been seen as the kickoff for holiday sales, but analysts say consumers have shifted spending through the month and are doing more shopping online.
Coupled with strong job reports and signals of upcoming wage growth, the sales data could boost confidence in the durability of the recovery as the Federal Reserve debates when and how fast to raise U.S. interest rates.
Retail sales excluding automobiles, gasoline, building materials and food services, increased 0.6 percent last month after rising 0.5 percent in October, the Commerce Department reported. The so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. November’s increase exceeded Wall Street’s expectations for a 0.4 percent gain.
It also suggested that consumer spending, which accounts for more than two-thirds of U.S. economic activity, was accelerating in the fourth quarter after slowing in the July-September period.
Core November sales were up 4.4 percent from a year earlier, the largest year-over-year increase since early 2012. Over the past 20 years, the average change in December sales is close to the average change in November, and analysts said they expected last month’s momentum to continue.
The National Retail Federation said the November result supported its expectation for an overall 4.1 percent jump in holiday season sales – confirming its conclusion that the poor Black Friday showing was a result of a shift in shopping patterns rather than a sign of weakness.
Economists at Macroeconomic Advisers boosted their forecast for fourth-quarter economic growth by three-tenths of a percentage point to an annualized rate of 2.4 percent, on the “unexpected strength” in consumer spending. Initial estimates of prior months’ consumer spending were also revised upward.
The gains were broad-based. Sales for clothing stores like Reed’s grew a particularly strong 1.2 percentage points over the prior month, while electronics and appliance outlets saw a sizable 0.9 percent gain.
Even gasoline stations recorded a better-than-expected result, declining a less-than-anticipated 0.8 percent. Gasoline prices have dropped an average of 67 cents per gallon since the start of the year, saving consumers tens of billions of dollars at the pump.
“Perhaps there was an offsetting volume effect, or gas station visitors just spent the extra money on corn nuts, beef jerky and hood ornaments,” RBS Securities economist Guy Berger said.