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Retail Sales In November Jump 1.2%, Exceed Forecasts

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Bloomberg News

Published: December 14, 2007

Retail sales exceeded forecasts in November, and wholesale prices jumped the most in 34 years, diminishing both the need and scope for the Federal Reserve to make deeper interest-rate cuts.

Retail sales rose 1.2 percent in November, the Commerce Department said, twice as much as economists anticipated.

Separate figures from the Labor Department showed prices paid to U.S. producers climbed 3.2 percent. Excluding food and fuel, expenses rose 0.4 percent.
Treasury notes fell after the reports, which signaled the economy might avert a recession even as the housing slump shows no sign of abating.

The figures are consistent with the Fed's prediction two days ago of a "moderate" expansion next year, while energy and commodity prices may stoke inflation.

"We should still see reasonable sales growth and no recession," said Allan Meltzer, professor of political economy at Carnegie Mellon University in Pittsburgh. "It's quite reasonable to expect high energy prices will slow business investment and, eventually, consumer spending, but people are working, the unemployment rate is low and Christmas is Christmas."

The government numbers for November contrast with some industry reports that suggest spending may weaken this month.

Sales fell 2.7 percent in the seven days through Dec. 8, following a 4.4 percent decline a week earlier, Chicago-based research firm ShopperTrak RCT said Thursday.

"This may be the calm before the storm, but so far the consumer is weathering the bad news out there," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.

The 30-member Standard & Poor's 500 Retailing Index fell 1.1 percent to 420.1. The S&P 500 Index rose 0.1 percent.

Purchases at furniture, electronics, building-material, and department stores increased, the Commerce Department said. Only auto dealers and miscellaneous store retailers declined in November.

The department separately reported that inventories at U.S. businesses increased less than forecast in October as sales rose, reflecting stronger demand at grocery stores. Inventories gained 0.1 percent as sales advanced 0.7 percent.

Morgan Stanley economists lifted their estimate for economic growth this quarter after the reports, to 1.2 percent, from 0.2 percent. Their counterparts at Bank of America raised their calculation to between 0.5 percent and 1 percent, from 0.1 previously.

Excluding autos, gasoline and building materials, the figures the government uses to calculate gross domestic product, sales rose 1.1 percent.

"It gives us one solid number for this quarter, which will aid growth," said Ryan Reed, an economist at National City Corp. in Cleveland, who correctly predicted the sales increase.

Sales were expected to rise 0.6 percent, based on the median forecast of 80 economists surveyed by Bloomberg News.

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