U.S. Retail Sales Rose in November -- 3rd Update
December 14 2017 - 1:29PM
Dow Jones News
By Sharon Nunn
WASHINGTON -- Americans are spending more this holiday season
than analysts expected, fueled by income gains, confidence in the
economic outlook, buoyant financial markets and modest
inflation.
That includes spending at brick-and-mortar stores such as
Walmart Inc. and Nordstrom Inc., which clocked the largest
year-over-year November sales increase in seven years.
Home-furnishing stores, electronics and appliance stores also
posted strong spending numbers, despite competition from online
shopping websites, which also posted robust gains.
"It's an impressive start to the holiday season and probably the
best in the last few years," said Jack Kleinhenz, chief economist
at the National Retail Federation, a group that represents retail
stores. "When you put the pieces together, job and wage gains,
modest inflation, healthy balance sheet and elevated consumer
confidence ... there's an improved willingness to spend."
Altogether, purchasing at online retailers, brick-and-mortar
stores and restaurants rose 0.8% in November from the prior month,
significantly above the 0.3% increase economists surveyed by The
Wall Street Journal had expected. That was up 5.8% from a year
earlier, the largest yearly November increase since 2011. Despite
their woes from online competition, general merchandisers such as
department stores fared well, registering a 3.6% increase from a
year earlier, the best November performance since 2010.
"Overall these data are much stronger than expected," said Ian
Shepherdson, an economist at Pantheon Macroeconomics, in a note to
clients. "People have the inclination and the wherewithal to
continue spending at a robust pace."
Taken altogether, the data suggest the U.S. is on track for
robust growth in the fourth quarter. Macroeconomic Advisers, a
forecasting firm, estimated the economy is growing at a 2.8% annual
pace in the October-to-December period, two-tenths of a percent
more than estimated before the retail data release. The Federal
Reserve Bank of Atlanta estimated a 3.3% growth rate.
One caveat: Spending is so strong it is outpacing income gains,
meaning Americans are saving at a slower rate, which could lead to
a slowdown later or the threat of rising debt levels.
Spending comparisons to last year were boosted by a weak holiday
season in 2016 for retailers, which were plagued by high
inventories and a slowdown in purchases by international tourists.
On top of that, shoppers waited for discounts or ordered online,
crimping profits for many retailers.
This year, some brick-and-mortar stores appear to be better
managing their inventory. In their most recent quarter, both Macy's
Inc. and Kohl's Corp. said their stores had less excess merchandise
to clear out at steeply reduced prices. "We don't have the
albatross of a lot of extra inventory like we did last year,"
Macy's Chief Executive Jeff Gennette said in an interview on Black
Friday. That, in turn, resulted in less discounting, Mr. Gennette
said.
Mr. Kleinhenz said increasingly sophisticated website and app
advertising is helping brick-and-mortar retailers too. "It's a
combined strategy that retailers have developed that integrates the
use of the internet with the brick-and-mortar shopping approach,"
he said.
Investors were surprised by better-than-expected quarterly
results from some mall stalwarts that have been battered, including
Macy's and Gap Inc. "There is a consolidation taking place" in the
apparel market, Gap CEO Art Peck told analysts on Nov. 16. "Almost
regardless of consumer sentiment, we've got an opportunity to drive
growth and gain market share," Mr. Peck said, as the company closes
stores, remodels others and speeds up its product pipeline.
The closure of thousands of stores this year could be giving
those left standing a boost.
"On an overall basis, a portion of our improvement in our sales
trend is attributable to our targeted efforts to capture share from
competitive store closures in some of our trade areas, and we
expect this will continue, if not accelerate, through the holiday
season," Kohl's CEO Kevin Mansell told analysts in November.
Some local businesses are feeling the boost from the tightening
labor market. Pete Benck, owner of Madison, Wis.-based vintage
clothing store Good Style Shop, said this holiday season's business
has been stronger than last year. "We have had a lot of foot
traffic, and I think there's a lot of confidence in our consumers
lately," Mr. Benck said in an interview.
The NRF expects consumers nationwide to spend about 4% more
during the holiday shopping season than they had in 2016. That
would make 2017 the strongest holiday season since 2014. Mr.
Kleinhenz said the U.S. appears to be on track to meet that
goal.
Write to Sharon Nunn at sharon.nunn@wsj.com
(END) Dow Jones Newswires
December 14, 2017 13:14 ET (18:14 GMT)
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