November Retail Sales Gains a Positive Sign

Non-auto retail sales were up slightly in November for the fourth consecutive month as store traffic was enough to offset smaller basket sizes, said the Retail Industry Leaders Association (RILA). High unemployment and job insecurity continues to dampen consumer spending as cost conscious consumers seek out extreme value purchases.

Excluding auto sales, retail sales increased 1.2 percent over the previous month according to the U.S. Department of Commerce. Retail sales are up by 2.8 percent over the past four months and up by more than 4 percent since last December at the height of the financial crisis.

"Increased consumer activity in November is a welcome sign for retailers who have adjusted promotions, pricing and product assortment to appeal to consumers in search of the best value," said Casey Chroust, executive vice president for retail operations. "Although consumers are spending less per visit, increased store traffic is driving higher overall sales."

Sales increased in most retail categories in November. General merchandise stores such as department stores and discounters recorded their fourth straight monthly gain, with similar improvements for electronics and appliance retailers. Building material sales had their strongest month in more than a year, reflecting the nascent recovery in housing. Those areas of strength were partly offset, however, by a drop in clothing sales and ongoing continued decline in sales of furniture and home furnishings.
November Since July Since Dec.
Retail Segment 2009 2009 2008
-------------- -------- ---------- ----------
Total retail sales 1.3 2.8 4.6
Total excluding autos 1.2 2.8 4.4
"Core" sales (total excluding autos,
building materials, and gasoline) 0.5 1.9 2.8
Autos 1.6 2.9 6.1
Clothing -0.7 1.6 5.0
Electronics and Appliances 2.8 6.3 2.8
Food & beverage 1.0 2.1 3.6
General Merchandise 0.8 3.3 3.1
Health & personal care 0.3 2.1 3.8
Non-store retailers 1.2 4.5 6.8
Furniture and home furnishings -0.7 -2.5 -6.8
Building materials, garden equipment &
supplies 1.5 -2.1 -7.2
====================================== === ==== ====

A broad measure of "core" retail sales that tracks the underlying strength of retail sales to families increased 0.5 percent in November, its fourth consecutive monthly gain. Core sales exclude volatile spending on autos and gasoline as well as sales of building materials that are mainly purchased by contractors.

The strength of today's retail sales figures mirror last week's jobs report for November, which showed an economy that is stabilizing and moving toward recovery. The unemployment rate ticking down in November and job losses much smaller than expected. Other indicators likewise point toward a rebound: initial claims for unemployment insurance are down substantially from earlier in the fall, wages and household incomes were up in October and November, and household wealth has recovered with gains in stock values since the spring. Housing market indicators such as sales and home prices have stabilized, and forward-looking surveys of purchasing managers suggest that firms in both manufacturing and service industries see a better business climate ahead.

"Today's data were a welcome sign that consumers are gaining comfort and opening their wallets," said Donald B. Marron, visiting professor at the Georgetown Public Policy Institute and RILA outside economist. "We still have a long way to go to recover from the sharp declines in spending and employment over the financial crisis, but a wide variety of indicators point to a U.S. economy that is on the mend."

The retail industry, which greets millions of customers in their stores every day, knows full well the challenges consumers are facing in this economy. As the employer of nearly 15 million Americans, the retail industry also knows the effect that costly and burdensome regulations have on job creation and job retention.

"With so many American's out of work and many more worried about their jobs, policymakers intent on stimulating job growth and the economy must focus on reducing the challenges employers face rather than erecting new barriers to job creation - such as those contained in health care reform legislation. Congress simply should not pursue major initiatives that could add significantly to the cost and regulatory burdens faced by employers, specifically the retail industry, thus providing a disincentive to the hiring and business investment critical to ongoing economic recovery efforts," concluded Chroust.

RILA expressed concerns about Senate health care reform legislation earlier this week.

The Retail Industry Leaders Association is the trade association of the world's largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and operate more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.

Donald B. Marron is a visiting professor at the Georgetown Public Policy Institute, where he teaches courses in microeconomics and public finance. Dr. Marron is also president of Marron Economics LLC.

From 2002 to early 2009, Dr. Marron served in various senior positions in the White House and Congress including as a member of the President's Council of Economic Advisers, as acting director of the Congressional Budget Office, and as executive director of Congress's Joint Economic Committee. Before his government service, Dr. Marron taught economics and finance at the University of Chicago, Graduate School of Business, managed large antitrust cases at Charles River Associates, and served as chief financial officer of a health care software start-up in Austin, TX. He received his Ph.D. in economics from the Massachusetts Institute of Technology and his B.A. in mathematics from Harvard.