- The Washington Times - Wednesday, December 13, 2006


The holiday shopping season may not be so bad after all. Consumers came surging back into stores last month and pushed up retail sales at the fastest pace in four months.

The 1 percent increase reported by the Commerce Department yesterday was far above the 0.1 percent rise that many analysts had expected.

In another encouraging sign, the government revised the October sales performance to show a 0.1 percent decline rather than the 0.4 percent drop originally reported.

The November rebound was surprising given anecdotal evidence from retailers that sales had tapered off following a strong weekend after Thanksgiving.

“No matter what the retailers may be saying, it appears that consumers have taken out their wallets so far this holiday season,” said Joel Naroff, chief economist at Naroff Economic Advisors, a private consulting firm.

The November gains were widespread, led by a 4.6 percent surge at electronics and appliance stores. That increase is attributed in part to the introduction of sought-after video game consoles such as Sony’s PlayStation 3 and Nintendo’s Wii.

“Once again, the reports of the death of the U.S. consumer have been greatly exaggerated. This holiday season might be decent after all,” said Michael Gregory, an economist at BMO Capital Markets.

Consumer spending slowed significantly earlier this year when Americans were battered by gasoline prices above $3 per gallon, rising interest rates and a cooling housing market.

But gasoline prices are well below summer levels and job growth has stayed strong despite the economic slowdown. Economists now are hopeful that consumer spending will finish the year with solid gains.

The better-than-expected performance for retail sales followed a report Tuesday that the trade deficit narrowed sharply in October. Analysts said both reports were causing them to revise upward their estimates for economic growth for October through December.

Stephen Stanley, chief economist at RBS Greenwich Capital, said he now thought the economy would expand at a 2.5 percent rate over the final three months of the year, compared with his previous estimate of 1.8 percent growth.

The economy began 2006 with a sizzling 5.6 percent rate, then slowed to 2.6 percent in the spring and 2.2 percent in the summer as the consumer cut back. Consumer spending is followed closely because it accounts for two-thirds of total economic activity.

The Federal Reserve on Tuesday left interest rates unchanged at policy-makers’ last meeting of the year. While they noted the “substantial” cooling of the housing market, they said that the economy should expand at a moderate pace in the months ahead.

Analysts said the Fed appears close to achieving its hoped-for soft landing, in which growth slows enough to cool inflation pressures without triggering a recession.

Oscar Gonzalez, an economist at John Hancock Financial Services in Boston, said the November gain in retail sales should “put to rest fears that the economy is in danger of a sharper slowdown.”

Some economists, however, said the November jump in sales could have been influenced by special factors and might be reversed this month.

“We think it is very likely that sales will either be revised down or there will be a hefty drop in December,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Sales at gasoline stations were up 2.3 percent last month following a 5.3 percent decline in October, a drop that reflected falling pump prices rather than a lower volume of sales. Excluding autos, sales were still up a solid 0.9 percent last month.

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