- Retail sales in November 2013 rose 0.7%, and that was up from both a 0.6% gain in October and market expectations of a 0.6% increase.
- The overall gain was helped by a jump in auto sales although strength was also evident in a number of other components.
- Some offset was provided by a price-related 1.1% decline in sales at gasoline stations.
- Control retail sales, which exclude sales at auto dealerships, gasoline stations, and building material stores (although includes food services), rose a much stronger than expected 0.6%, which built further on an upwardly revised 0.8% gain in October.
- The continued solid gain in November retail sales was encouraging. Although it was led by a sharp jump in auto sales, the solid increase in the control measure defied concerns about the potentially dampening effect of a later than usual Thanksgiving holiday. Today’s report was consistent with our view that fourth-quarter 2013 consumer spending growth strengthened to an annualized 2.5% from the 1.4% increase recorded in the third quarter. If upcoming employment reports continue to show solid job gains, thus helping to sustain consumer spending, then economic conditions should start to warrant a reduction of the Fed’s asset purchases. Although we do not assume any change in policy coming out of next week’s policy meeting, the March Federal Open Market Committee (FOMC) is a likely start date for so called ‘tapering’ by the Fed.
- In a separate release, jobless claims for the week ending December 7, 2013 jumped back up to 368,000 from an upwardly revised 300,000 in the previous week although with the large swings likely reflecting the effect of a later than usual Thanksgiving holiday.
Nominal retail sales in November 2013 rose 0.7%, which was slightly above the 0.6% gain expected. As well, this increase built further onto an upwardly revised increase in October of 0.6% that was previously reported as up 0.4%.
Expectations had been for a solid gain based on earlier-reported indications of a sizeable jump in unit auto sales in the month that surged to an annualized 16.3 million units. This strength was reflected in the motor vehicle component of retail sales rising 1.8%. Overall sales were also helped by a stronger than expected rebound in sales at building material stores of 1.8% following a 1.5% drop in October.
As expected, a drop in gasoline prices contributed to nominal receipts from gasoline stations declining 1.1%.
Today’s report, however, indicated strength well beyond autos and building materials. The so called ‘control’ measure, which excludes sales at motor vehicle dealerships, gasoline stations, and building material stores (although includes food services), and which feeds directly into the gross domestic product (GDP) add up, rose a stronger than expected 0.6%. Equally encouraging was that this increase built further onto an upwardly revised 0.8% increase in October that was previously reported as up 0.5%. The gain in November reflected a 1.1% jump in sales at furniture stores and a 2.2% surge in ‘non-store retailers’, which capture on-line sales activity.
The continued solid gain in November retail sales is encouraging. Although it was led by a sharp jump in auto sales, the solid increase in the control measure defied concerns about the potentially dampening effect of a later than usual Thanksgiving holiday. As well, the increase builds further onto an upwardly revised gain in October. Strength in retail sales during the last two months is consistent with our view that fourth-quarter 2013 consumer spending growth will strengthen to an annualized 2.5% from the 1.4% increase recorded in the third quarter. This will not prevent overall GDP growth slowing to 1.4% from 3.6% during the same period as inventories are pared from a large third-quarter build and government spending is reduced. The Fed, however, is likely to take encouragement from the strength in this key area of household spending. If upcoming employment reports continue to show solid job gains, thus helping to sustain consumer spending, the economic conditions should start to warrant a reduction of the Fed’s asset purchases. Although we do not assume any change in policy coming out of next week’s policy meeting, the March FOMC is a likely start date for so called ‘tapering’ by the Fed.
In a separate report, jobless claims for the week ending December 7, 2013 rose more than expected to 368,000 from 300,000 last week, which was revised marginally higher from the previously estimated gain of 298,000. These large swings are likely the result of difficulty seasonally adjusting the data in the face of a later than usual Thanksgiving holiday. The four-week moving average, which better controls for this issued, remained low at 329,000, which was up slightly from 323,000 the previous week but well down from 345,000 from a month ago.
RBC