Retail Sales Climb Less Than Forecast

By Alex Kowalski - Dec 14, 2011 5:10 AM GMT+0700

Retail sales rose in November at the slowest pace in five months, indicating American consumers were trying to live within their means heading into the holiday shopping season as wages dropped.

The 0.2 percent gain in purchases fell short of the 0.6 percent median forecast of economists surveyed by Bloomberg News and followed increases in the prior two months that were larger than previously estimated, according to data from the Commerce Department today in Washington. Other reports showed inventories climbed in October and job openings fell.

Demand for autos, the latest fashions and electronics propelled the increase in spending last month, while households cut back on groceries and restaurant meals, showing how limited job and income gains are holding consumers back. Retailers like J.C. Penney Co. are pushing discounts to drum up business, a sign of a lack of inflation that allowed the Federal Reserve today to hold interest rates near zero.

“Sales are growing, but they just aren’t accelerating,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York. “There have been some real slight hints of improvement in the labor market, but until we get sustained growth in income, spending is going to be moderate.”

U.S. stocks fell after the Fed’s final policy meeting of the year. The Standard & Poor’s 500 Index decreased 0.9 percent to 1,225.73 at the close in New York after having been up as much as 1.1 percent. Treasury securities rose, sending the yield on the benchmark 10-year note down to 1.97 percent from 2.01 percent late yesterday.

Fed Meets

Fed policy makers led by Chairman Ben S. Bernanke refrained from taking new actions to lower borrowing costs, saying the economy is growing even as the global growth cools.

“The economy has been expanding moderately, notwithstanding some apparent slowing in global growth,” the Federal Open Market Committee said in a statement at the conclusion of its meeting today in Washington. “While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated.”

German investor confidence unexpectedly rose in December for the first time in 10 months, indicating Europe’s largest economy is weathering the region’s debt crisis, a report showed today. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased from a three-year low in November.

Growth in China

Fitch Ratings said in a report today that China faces slower growth in home sales and construction next year as the government controls lending to developers in a bid to stabilize property prices. China’s leaders, who began their annual meeting in Beijing yesterday to map economic policies, may decide to cut taxes to spur growth after already reducing banks’ reserve requirements, according to China International Capital Corp., Goldman Sachs Group Inc. and Barclays Capital.

The increase in U.S. retail sales matched the weakest estimate of 83 economists surveyed by Bloomberg, which ranged from gains of 0.2 percent to 1.1 percent. The Commerce Department revised the advance in October purchases up to 0.6 percent from a previously estimated 0.5 percent, and September was pushed up to 1.3 percent from 1.1 percent.

Seven of 13 major categories showed gains last month, led by a 2.1 percent jump at electronics and appliance stores and a 0.5 percent increase at clothing stores.

Purchases may have accelerated at the end of the month as spending jumped 9.1 percent per customer to $398.62 in the weekend after the Thanksgiving holiday from a year earlier, according to the National Retail Federation. Sales totaled a record $52.4 billion.

After Thanksgiving

“We were positive throughout the month going into Thanksgiving and it only got better from there,” Timothy Johnson, senior vice president of finance at retailer Big Lots Inc. (BIG), said during a Dec. 2 earnings call.

J.C. Penney and Sears Holdings Corp. (SHLD)’s Kmart chain proclaimed on the front pages of their websites on Dec. 5 that it was Cyber Monday, a week after the actual event occurred. On this Cyber Monday, a term invented by the Washington-based NRF in 2005, deals ranged from 40 percent off a DVD player from Samsung Electronics Co. to 80 percent off a children’s camcorder.

Sales rose 0.5 percent at automobile dealers, after a 0.8 percent increase the prior month, today’s report showed. The increase was smaller than the rise in demand reported by automakers, which are the figures used to calculate gross domestic product.

Car Sales

Car and light truck sales advanced 3 percent last month to a 13.6 million seasonally adjusted annualized rate, the best month since August 2009, according to researcher Autodata Corp.

Sales excluding autos, gasoline and building materials, which renders the figures used to calculate gross domestic product, climbed 0.2 percent after a 0.6 percent increase in the previous month.

Payrolls climbed by 120,000 workers in November, and the jobless rate fell to 8.6 percent, the lowest since March 2009, from 9 percent, Labor Department figures showed Dec. 2. The report also showed hourly earnings dropped 0.1 percent on average, the first decrease since August.

The number of positions waiting to be filled dropped in October, indicating a sustained rebound in the labor market may take time to develop. Openings fell by 110,000 to 3.27 million, the Labor Department said today in Washington. Hiring also slowed by 110,000 from the prior month to 4.04 million, and firings eased.

Inventories rose 0.8 percent in October, the biggest gain in five months, as companies replenished depleted stocks heading into the holidays, another report from the Commerce Department showed. Even with the increase businesses had enough goods on hand to last 1.27 months at October’s sales pace, close to its lowest level of the year.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net