The outlook for the broad retail sector may not be as bad as initially expected. This morning’s better than expected retail sales numbers certainly point in that direction. While last year’s dismal numbers are by all means a big help for the comparisons, there are some clear pockets of strength as well. Discounters are doing better than the high-end players, online is gaining in strength and market share. Amazon’s (AMZN) recent momentum and FedEx’s (FDX) positive guidance are along the same broad theme.
The Commerce department reported this morning that retail sales rose 1.3% in November, roughly double the expected gain of 0.7%. Sales for the preceding month were revised down to 1.1% from the originally reported 1.4% gain. Autos and auto-parts sales were particularly strong in November, rising 1.6%. High gasoline prices, essentially a function of recent strength in crude oil prices, drove gasoline sales during the month, up 6% in November. Excluding autos, auto parts, and gasoline, retail sales were up 0.6% in November, fourth consecutive monthly gain.
Consumers appear to be in a less dour mood this holiday season, despite the extremely weak jobs market and continued credit market problems. While recent trends indicate that the labor market may finally be on the mend, the road to a full recovery in the labor market (getting back to pre-recession levels) is believed to be years away. On the positive side of the ledger, gains in household net worth, primarily a function of stock market gains from its March lows, are supportive of the retail outlook.
With the U.S. economy heavily reliant on the health of the consumer, today’s better than expected retail sales numbers is another reassuring signal that the economy is on the mend.
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