US Retail Sales Expand Faster than Forecast
Retail sales in the United States exceeded forecasts in November, as bargain hunters took advantage of the holiday season. Retail purchases increased 0.7 percent, according to official data from the Commerce Department. The median estimate of 83 economists surveyed by Bloomberg called for a 0.6 percent hike.
Retail service activity increased at the fastest pace in five months, with total sales exceeding $423 billion. Compared to year-ago levels, retail activity expanded 4.7 percent. In total, eight of the 13 major retail sub-sectors reported gains last month, led by auto dealers, furniture stores and non-store retailers. Excluding automobiles, retail revenues expanded 0.4 percent in November, also higher than forecasts.
Miscellaneous retailers, gas stations, clothing outlets and food and beverage stores were the major categories to report declines, official data showed.
“We’re going in the right direction,” said Joseph LaVorgna of Deutsche Bank Securities Inc.
Lower gas prices, higher wealth via the bull market and wage growth have increased consumer optimism in the holiday season, as evidenced by the greater willingness to spend. Consumer sentiment reached a five-month high in December, according to a monthly survey from Reuters and the University of Michigan.
However, business conditions remain “volatile and promotional,” according to Robert Hanson of American Eagle Outfitters. Store traffic declined more than 10 percent the week after Black Friday, the largest plunge since 2009. Holiday shopping represents up to 40 percent of retailers’ annual revenue and 20 percent of their total profit, according to the National Retail Federation.
Conversely, revenue at non-store retailers jumped 2.2 percent in November and at an annualized rate of 9.4 percent, as more shoppers look to the internet to fill their holiday baskets. Online shopping soared 20 percent on Cyber Monday, as retailers extended their discounts to cyber space.
Although bargains are good for shoppers, excessive discounts are expected to eat away into retailers’ profit margins this quarter. Retail companies will report on Q4 earnings in 2014.
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