Retail sales last month rose to the highest level since November 2007, just before the start of the recession. It was the fifth straight gain in retail sales. Sales in October surged 1.7%, revised up from a previously estimated 1.2% increase. The large gains are welcome because consumer spending is a big engine of the economy.
Jim Baird, an investment strategist for Plante Moran Financial Advisors, said the report shows consumers were boosting spending in the middle of the holiday shopping season, which is a critical period for merchants. "Compared to a year ago, the results are very encouraging," he said.
he retail-sales data prompted Macroeconomic Advisers, a research firm, to lift its tracking forecast of fourth-quarter gross domestic product by four-tenths of a percentage point to 3.1%. GDP is the broad measure of economic activity in the U.S.
But Paul Dales, an analyst at Capital Economics, questioned whether strong spending would endure. "Without a meaningful acceleration in real income growth, this tentative consumer revival cannot last," Mr. Dales said.
High unemployment has kept the pace of spending modest. To spur the economy, the Federal Reserve last month unveiled a plan to buy $600 billion in Treasury securities. In addition, President Barack Obama has agreed with Republicans in Congress on a tax-cut deal.
Tuesday's retail-sales report showed auto and parts sales fell by 0.8% in November, after surging 5.6% during October. But excluding autos, retail sales in November rose 1.2%, topping expectations for a gain of 0.7% as general-merchandise store sales climbed by 1.3% and clothing-store sales surged 2.7%. Non-store retailers, which include mail order and Internet sales, jumped 2.1% in November.
Another government report showed inventories at U.S. businesses rose less than expected in October. The data showed auto dealers and other retailers sold goods faster than they replenished stockrooms. Inventories increased 0.7% from the prior month to a seasonally adjusted $1.418 trillion, the Commerce Department said, the highest level since February 2009. Economists surveyed by Dow Jones Newswires had forecast a 1% increase.