American consumers increased their spending in November, offering some hope to retailers ahead of the holiday season following three months of unimpressive sales growth.
Sales at retailers and restaurants rose a seasonally adjusted 0.2% in November from October, the largest increase since July, the Commerce Department said Friday.
Ongoing robust job creation and slowly rising wages, combined with sustained low gasoline prices, appear to have finally given consumers the green light to spend. Consumers spent more across a range of categories, including electronics and appliances, clothing, sporting goods and books, and at restaurants and bars.
Retail sales figures had come in nearly flat over the past three months, as consumers saved their extra earnings.
Still, the slight rise in spending in November is less than the 0.3% rise expected by economists, and hardly reassures those looking to U.S. consumers for the freewheeling spending that could jump-start economic growth. Low gasoline prices are partly to blame for the low reading: Sales at gasoline stations fell 0.8% in November and are down 19.9% from November 2014.
Consumer spending accounts for 70% of economic output in the U.S., and retail sales account for about one-third of that spending. The past few months' anemic growth in retail sales have sent a worrying sign that consumer demand in the world's largest economy - potentially a bright spot in a sluggish global economy - is not strong enough to push the U.S. out of the modest 2% growth it has been posting in recent years.
Sales rose just 0.1% in October, and are up just 1.7% in the three-month period through November from the same period a year ago. That's compared with a 2% rise in the 11-month total for 2015 over the same period in 2014, illustrating how sales have slowed over the past few months.
Sales at nonstore retailers, a category that includes online spending, rose 0.6%, and are up 7.3% from November 2014.
Excluding motor vehicles, retail and food sales were up 0.4%. Economists had expected a rise of 0.3% excluding cars. Excluding gasoline, whose price has fallen steeply over the past year, retail and food sales rose 0.3%.
Some categories have seen strong growth over the past year: Sales at furniture stores, for example, are up 5.4% in November from a year earlier, although they fell 0.3% from October. That could be driven by a housing market that, according to the National Association of Realtors, is on track for its best year of home sales since the recession. Sales at auto dealers are up 4.5% over the year, and sporting goods stores have seen 5.4% growth.
Several signs point to an economy that should have consumers poised to ramp up spending. Job growth has been consistent, with employers adding an average of 210,000 jobs a month in the year through November, pushing the unemployment rate down to a healthy 5%. Wages have been rising as the labor market tightens and minimum wage laws across the country impact local markets.
But Americans have been reluctant to let loose in the second half of the year, preferring instead to stash their extra income. In October, the personal savings rate - the share of a person's disposable income that is saved - hit 5.6%, the highest rate since 2012, even as personal income rose 0.4% from the previous month.
Adding to the puzzle, rising wages and low gasoline prices have gone hand in hand with increased purchasing power in certain categories: the strong U.S. dollar has led to declining prices for Americans for imported manufactured goods like clothing. But those factors have been offset by more rapidly rising prices for things like housing and health care -- already among the largest expenditures in a household's budget. Spending on services, which by and large are not imported, accounts for about two-thirds of overall consumer spending.
But the dollar's strength has also dampened overseas demand for American-made goods, weighing heavily on the domestic manufacturing sector. Firms that supplied equipment to mining and oil drilling companies have been extra-hard hit by low commodity and energy prices, and thousands of jobs have been cut in the mining and energy sectors.
Uncertainty about future demand, both overseas and domestic, has also discouraged U.S. businesses from investing in machines and computers. That limits potential growth, worker productivity, and the wage increases that usually come alongside.
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