American consumers flocked to the malls and shops in November, providing the retail industry with a hopeful start to the holiday season as lower fuel prices and higher wages have made household budgets more expansive.
Retail sales gained 0.7 percent, almost double the 0.4 percent median estimate in the Bloomberg survey and following October’s upwardly revised 0.5 percent advance, reported the Commerce Department today.
Recent gains in wages, average hourly earnings rose 0.4 percent in the latest monthly report, the strongest increase in 18 months, and the lowest gasoline prices in four years have given consumers more discretionary income which they are distributing in the 70 percent of the U.S. economy tied to consumption.
The decline in fuel prices puts more money into discretionary spending because demand for gasoline is relatively inelastic, meaning that whether the price is high or low American trend to drive the same amount. So a drop in gasoline expenditures allows money to be spent on other purchases but does not increase the overall amount of consumption.
Demand rose in 11 of 13 retails categories tracked by the Commerce Department. Only service stations and miscellaneous retailers showed decreases.
Retail sales figures reflect both volume and price changes. The 8 percent drop in receipts at service stations mirrors the 7.3 percent fall in the price of gasoline on the month.
A gallon of regular gasoline cost $2.99 at the beginning of the month and $2.77 at the end, according to the American Automobile Association and had fallen to $2.62 yesterday. It is down more than a dollar from the year’s high of $3.70 in April.
A strengthening job market has also helped consumer feel better and spend more on the holidays.
Non-farm payrolls climbed 321,000 last month, the most in almost three years, after a 243,000 gain in October. The U.S. economy has created an average of 241,000 jobs per month this year, the best stretch of new employment in over 15 years. The jobless rate held at 5.8 percent a six-year low, though the labor force participation at 62.8 percent was just 0.1 percent from its 35 year low.
Retail sales excluding autos rose 0.5 percent in November, far outstripping the 0.1 percent forecast. Car purchases improved to a 17.1 million annual pace in November up from 16.4 million the previous month though down from 17.5 in August, which was the best rate since January 2006.
The so-called 'retails sales control group' which closely limns the consumption component of GDP, gained 0.6 pert in November biter than the 0.5 percent predicting and the best reading since March.
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