Solid U.S. Retail Sales Point to Brisk Consumer Spending

U.S. consumer spending advanced at a brisk clip in November as lower gasoline prices gave the holiday shopping season a boost, offering the latest sign of underlying momentum in the economy.

The Commerce Department said on Thursday retail sales excluding automobiles, gasoline, building materials and food services, increased 0.6 percent last month after rising 0.5 percent in October.

The so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

"It provides a bit of a boost to fourth-quarter growth estimates," said Dan Greenhaus, chief strategist at BTIG in New York. "We expect the lower gasoline price boost to continue into next year's first half and with an improving jobs market, GDP should be well-supported in coming quarters."

November's increase in core retail sales exceeded Wall Street's expectations for a 0.4 percent gain. It also suggested that consumer spending, which accounts for more than two-thirds of U.S. economic activity, was accelerating in the fourth quarter after slowing in the July-September period.

Forecasting firm Macroeconomic Advisers raised its fourth-quarter growth estimate by three-tenths of a percentage point to a 2.4 percent annual rate.

U.S. stocks rose on the data, bouncing sharply from a three-day drop. Lululemon Athletica shares surged after the yoga apparel maker posted quarterly results.

U.S. Treasury debt yields edged up, while the dollar rose against a basket of currencies.

The solid retail sales data added to November's bullish employment report in painting a fairly upbeat picture of the economy, despite a recession in Japan and faltering growth in the euro zone, China and major emerging markets.

In a separate report, the Labor Department said new claims for state unemployment benefits fell last week, pushing them firmly beneath the key 300,000 level, in a sign of continued improvement in the jobs market.

Tightening labor market conditions are starting to spur faster wage growth, which together with lower gasoline prices is helping to stimulate consumer spending.

BROAD-BASED GAINS

U.S. gasoline prices have dropped by about 64 cents to $2.767 per gallon since the beginning of the year. Economists at Moody's Analytics estimate that consumers save about $1 billion over a year with each one-cent drop in the price of gasoline.

"Consumers are putting the money they save at the pump to work," said Gennadiy Goldberg, a strategist at TD Securities in New York.

Lower energy prices are also keeping imported inflation pressures subdued. A second report from the Labor Department showed import prices recorded their biggest drop in nearly 2-1/2 years in November.

Last month, core retail sales were lifted by a 1.2 percent jump in receipts at clothing stores, an indication that the holiday shopping season got off to a solid start, with retailers offering discounts to attract shoppers.

Aside from clothing, there were increases in most of the retail sales categories.

While declining gasoline prices are supporting consumer spending, they weighed on service station sales, with receipts falling 0.8 percent.

That decline was, however, offset by a 1.7 percent surge in automobile sales, which helped lift overall retail sales by 0.7 percent in November. It was the largest gain since March and followed a 0.5 percent increase in October.

(Reporting by Lucia Mutikani; Editing by Paul Simao)