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Can U.S. Consumers Spend their Way to Happiness?

Posted by Joseph Trevisani on Dec 12, 2013 10:28:00 AM

American consumers may be worried when they answer sentiment surveys but either they are better off than they admit or holiday spending is an antidote to the blues.

Retail spending advanced more than forecast in November and substantial revisions to October's totals indicate that the holiday season may be far better than originally estimated.

Overall sales rose 0.7 percent for the best reading since June, sales excluding autos climbed 0.4 percent and the so called 'control group' or core sales which closely tracks the sales component of GDP gained 0.5 percent. All groups were stronger than their median estimates from the Bloomberg survey, 0.6 percent for sales, 0.2 percent for ex-autos and 0.3 percent for the 'control group' respectively.

The University of Michigan consumer confidence figure for November initially had come in at 72.0, lower than both the 74.5 forecast and October's 73.2 score.  It was later revised to 75.1. The Conference Board saw a similar drop to 70.4 in November from 71.2 the prior month, below the 72.6 forecast.  

Revisions to the October results in three categories limned further strength in consumption, 70 percent of American GDP. Overall sales rose to 0.6 percent from 0.4 percent, sales without automobiles more than doubled from 0.2 percent to 0.5 percent and core sales jumped to 0.7 percent from 0.4 percent.

The solid performance in retail sales following the revision in 3rd quarter GDP to 3.6 percent from 2.8 percent, November's 203,000 non-farm payrolls and the 0.3 percent drop in the unemployment rate to 7.0 percent the lowest in five years, has again incited speculation that the Fed may be willing to begin reducing its $85 billion in securities purchases as soon as next week’s FOMC meeting on the 17th and 18th.

Market sentiment still favors a hold until after the presumed new Federal Reserve chairman Janet Yellen takes over on February 1st. There are two more FOMC meeting under the current Chairman Ben Bernanke, the above mentioned 18th and January 28th and 29th.The first FOMC under Ms Yellen’s leadership would be March 18th and 19th.

The yield on the 10-year generic Treasury reached 2.8865 percent in intra-day trading today, the highest in three months except for a brief spike to 2.9286 last Friday around the employment situation report at 8:30 am. It closed that day at 2.8553 percent.  This benchmark bond has gained 38 basis points in yield since it closed at 2.5016 on October 23rd.

Retail sales in November were supported by a 1.8 percent jump in business at automobile dealers and parts suppliers. Gasoline sales fell 1.1 percent partially the result of lower prices.    Furniture, electronics and sporting goods stores reported gains while  clothing stores noted a minor drop in receipts.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts:  Bloomberg





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