US Consumer Is More Upbeat —And Spending More, Too
Published: Friday, 11 Dec 2009 | 10:48 AM ET Text Size By: Reuters
US consumers stepped up their spending in November and grew more optimistic this month, data showed on Friday, raising hopes a self-sustaining economic recovery was starting to unfold.
The Commerce Department said total retail sales increased 1.3 percent last month, the largest advance since August, after rising 1.1 percent in October.
It was the second straight monthly gain and beat market expectations for a 0.7 percent gain.
A separate report showed consumer sentiment improved in early December on signs of stabilization in the labor market.
The data were the latest in a series showing the economy may expand at a brisker pace in the fourth quarter than the 2.8 percent annual rate in the July-September period.
"The improvement in confidence is a complement to the good retail sales. It suggests that the consumer is slowly turning upward," said Alan Gayle, senior investment strategist, Ridgeworth Investments in Richmond, Virginia The data lifted U.S stock indexes and the U.S. dollar rose sharply against the yen and euro.
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of sentiment for December rose to 73.4, just a touch below the year's high set in September. This was above the 67.4 for November and exceeded economists' expectations of a reading of 68.5.
The data eased concerns that the economy's recovery could falter because of lackluster consumer spending. The economy resumed growing in the third quarter, fueled mostly by government stimulus.
With the labor market starting to stabilize and household wealth rising, there is growing optimism that consumer spending will soon pick up.
Overall sales in November were boosted by strong receipts from gasoline stations, increased purchases of motor vehicles and parts, building materials and electronic goods among others.
"The numbers were a pleasant surprise. Consumers are starting to spend a little more freely than they have been and that is going to be an important source of sustainable growth," said David Resler, chief economist at Nomura Securities International in New York.
Despite slightly lower gasoline prices at the end of November from the end of October, sales at service stations surged 6 percent, the largest increase since June.
Compared to November last year, overall retail sales were up 1.9 percent, the first year-on-year gain since August 2008, a Commerce official said.
Some analysts said the unexpectedly strong data could cause problems for the U.S. Federal Reserve.
The U.S. central bank, which meets next week, has committed to keep interest rates near zero for an "extended period", while watching to see if the recovery will pick up steam.
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"The big picture...is that the recovery looks to be more on track. That combination of improvements in the labor market and improvements in consumer spending is a strong signal that we're not at this point entering into a double-dip scenario," said Torsten Slok, senior economist at Deutsche Bank in New York.
Thats the good news the bad news is that the Dollar is starting to rally sending commodities lower...The top chart is the Euro, the middle chart is the CRB, the third chart is Oil and the lower chart is Gold.
The stronger dollar is starting to pop the commodity bubble ...the stock market is next
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