November’s retail sales were nothing to jump up and down about. But, importantly, they increased for the first time in a year.
In other words, despite 10% unemployment, the housing collapse, and a credit crunch, U.S. consumer spending continues to recover.
Asha Bangalore of Northern Trust walks through the data:
Retail sales moved up 1.3% in November after a 1.1% gain in October. Excluding autos, retail
sales have risen 1.2% in November. Excluding the autos, gasoline, and building materials, retail
rose 1.0% in November. The important signal is that weakness in retail sales is behind us. On a
month-to-month basis, retail sales excluding autos, gasoline, and building materials have moved
up four straight months!
Equally, noteworthy is the fact that retail sales have risen from a year ago (+1.8%, see chart 2) after an extended period of declines.
The improving picture of retail sales translated to steady retail inventories. Overall business
inventories increased 0.2% in October, the first monthly gain since September 2008. The positive
contributions were from the factory and wholesale sectors. The increase in inventories is a
positive signal about demand conditions and the optimism of business about the future path of the
economy. The inventory-sales ratio slipped to 1.30 in October from 1.31 in the prior month.
In related news, the University of Michigan Consumer Sentiment Index advanced to 73.4 in the
early December survey from 67.4 in the prior month. Both the Expectations and Current
Conditions indexes advanced in December. The link between consumer outlook and spending is
tenuous when retail sales are considered on a month-to-month basis. However, the
year-to-year change in inflation adjusted consumer spending is stronger.
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