The upbeat picture was clouded somewhat by other data on Thursday
showing the biggest jump in a year in first-time claims for jobless
benefits. Economists, however, largely dismissed that report as
skewed by a late Thanksgiving and other factors.
The Commerce Department said retail sales increased 0.7 percent last
month as Americans stepped up spending on a wide range of goods from
automobiles to electronics. November's increase was the largest in
five months and followed a 0.6 percent rise in October.
"It should provide more confidence to the Fed that the economic
recovery has emerged from the political-induced uncertainties of
recent months essentially unscathed and reinforce the expectation
for the recent improved performance in the data to be sustained,"
said Millan Mulraine, senior economist at TD Securities in New York.
Economists polled by Reuters had forecast retail sales advancing 0.6
percent last month.
So-called core sales, which strip out automobiles, food services,
gasoline and building materials and correspond most closely with the
consumer spending component of gross domestic product, rose 0.5
percent after gaining 0.7 percent in October.
The core sales gain was consistent with consumer spending rising at
an annualized rate of at least 3.5 percent in the fourth quarter,
economists said. That would be a big step-up from the third
quarter's 1.4 percent pace.
"There are signs of an earlier pick-up in consumption that is also
likely to be the heart and soul of a future growth acceleration,"
said Alan Ruskin, head of currency strategy at Deutsche Bank
Securities in New York.
U.S. stocks were trading lower as investors' attention remained
focused on next week's Fed policy meeting. U.S. government bond
prices fell, while the dollar rose against a basket of currencies.
INVENTORY BUILDING CONTINUES
The relatively strong sales last month defied industry expectations
of a slow holiday season. Reports early this month suggested
shoppers spent less during the Thanksgiving weekend, the traditional
start of the holiday shopping season.
Middle-income shoppers have been careful in their spending, waiting
for the right promotions and in many cases shifting a lot of their
spending to big-ticket items like their cars or home repairs and
away from items such as clothing.
Home improvement chains Home Depot and Lowe's Inc last quarter
reported far better sales gains than chains such as Macy's Inc or
Spending is being supported by solid job gains and steady income
increases, and could help shield the economy in the fourth quarter
from an expected effort by businesses to reduce inventories that
piled up during the July-September quarter.
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The data prompted economists to raise their fourth-quarter GDP
growth estimates by as much as half a percentage point to as high as
a 2.2 percent annual rate.
Economists also said a second report from the Commerce Department
suggested businesses were not being as aggressive in selling off
inventories as had been expected, which could mean any correction
spills into the new year.
Inventories increased 0.7 percent in October, the largest gain in
nine months, after a 0.6 percent rise in September.
Lower gasoline prices are also helping, though they were a drag on
the retail sales figures, which are not adjusted for inflation.
The firming growth tone was tempered somewhat by a report from the
Labor Department that showed initial claims for state unemployment
benefits surged 68,000 to a seasonally adjusted 368,000 last week.
That was the largest weekly increase since November 2012 and
surpassed economists' expectations for a rise to only 320,000.
However, the four-week moving average for new claims, which irons
out week-to-week volatility, rose only 6,000, suggesting that a
recent strengthening of the jobs market remains intact.
"Through the volatility, the trend in claims is likely still
flat-to-down, consistent with no let-up from the recent solid pace
in payrolls," said Jim O'Sullivan, chief U.S. economist at High
Frequency Economics in Valhalla, New York.
Nonfarm payrolls increased strongly in October and November, and the
jobless rate hit a five-year low of 7.0 percent.
The steady stream of fairly upbeat data should give the Fed cover to
start cutting back its monthly $85 billion bond buying program soon,
and could fuel some speculation a move could come as early as the
central bank's meeting on Tuesday and Wednesday.
(Reporting by Lucia Mutikani; additional
reporting by Phil Wahba; editing by Andrea Ricci)
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