(BN) U.S. Retail Sales Rise More Than Economists Forecast as Consumers Recover

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U.S. Retail Sales Rise More Than Forecast as Consumers Recover

Dec. 14 (Bloomberg) -- Sales at U.S. retailers rose more than forecast in November as holiday shopping got under way, a sign consumers will play a bigger role in the recovery.

Purchases increased 0.8 percent, following a 1.7 percent gain in October that was larger than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.6 percent rise. Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales climbed 0.9 percent, the most since August.

Customers snapped up discounts at chains like Target Corp. and Macy's Inc. during the Thanksgiving weekend, the traditional kick-off to the busiest sales season of the year. Even as the world's largest economy gains momentum heading into 2011, high unemployment and the risk of a prolonged drop in prices remain concerns for Federal Reserve policy makers set to meet today.

"Holiday sales are looking pretty good," Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts, said before the report. "Consumer spending will steadily improve in coming months. We're seeing a better overall economic outlook."

The projected increase in retail sales was based on the median of 71 estimates in a Bloomberg News survey. Economists' forecasts ranged from increases of 0.2 percent to 1.5 percent. The Commerce Department revised the October reading up from a 1.2 percent gain previously reported.

Broad-Based Gains

Eight of 13 major categories showed increases last month. Sales at general merchandise stores climbed 1.3 percent, the most since October 2009, and purchases at non-store retailers, which include Internet merchants, advanced 2.1 percent, the biggest gain of the year.

Retailers began cutting prices earlier in November than the past few years and continued through Black Friday, the day after Thanksgiving. Sales at stores open at least a year climbed by the most in eight months from November 2009, industry reports showed.

Target and Costco Wholesale Corp. led the sales gains for discounters last month, while teen retailer Abercrombie & Fitch Co. and department stores Macy's and J.C. Penney Co. also posted better-than-forecast increases.

Purchases are broadening out beyond holiday gifts and clothing. Home Depot Inc., the world's largest home-improvement retailer, lifted its full-year profit forecast on stronger fourth-quarter demand for plumbing and electrical items and Christmas trees.

'Terrific' Demand

"As we look at November into December, we see strength across the store," Chief Financial Officer Carol Tome said Dec. 8 by telephone from an analysts' meeting in Boston. The Atlanta- based company had a "terrific Black Friday."

The National Retail Federation has forecast the November- December holiday sales gain will be the biggest since 2006. A Bloomberg survey taken Dec. 2 to Dec. 8 showed economists raised 2011 projections for consumer purchases, the biggest part of the economy, to 2.6 percent from 2.3 percent estimated last month.

Today, the International Council of Shopping Centers revised its November-December holiday-season sales forecast up by 0.5 percentage point to a range of 3.5 percent to 4 percent, citing "the strong November performance and promising trends in early December."

While recent gains in consumer sentiment bode well for retail sales, the unemployment rate, which in November reached a seven-month high of 9.8 percent, remains a hurdle.

Fed policy makers, who meet today for the final time this year, may reiterate the strategy to buy an additional $600 billion of Treasuries through June to try to trim joblessness and avert deflation, or an extended drop in prices.

To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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