Consumers’ big purchases lift hopes for US economy

The Associated PressDecember 12, 2013 

20111121 Holiday shopping

MCADAM — MCT

— Americans ramped up spending at retail businesses in November, providing a boost to the economy just in time for the holidays.

But traditional retail stores didn’t benefit as much from the latest burst of spending. Consumers bought more cars, electronics, furniture and other big-ticket items. They also did more shopping online. Those trends reflect changes in consumers’ shopping habits and in the broader economy.

Total retail sales rose 0.7 percent in November, the Commerce Department said Thursday. It was the biggest gain in five months. And spending at retail businesses rose 0.6 percent in October, higher than previously estimated.

Steady hiring and modest wage gains have boosted consumers’ confidence and given them more money to spend. Big increases in stock and home prices have also driven up household wealth. Stock indexes have reached record highs this year, disproportionately benefiting wealthier households.

Those trends are probably pushing up sales of more-expensive goods. Auto sales jumped 1.8 percent in November, furniture purchases increased 1.2 percent and sales at electronics and appliance stores rose 1.1 percent.

“Consumers who have money are spending and spending big,” said Diane Swonk, chief economist at Mesirow Financial. “Those who don’t aren’t.”

Sales of everyday items, such as clothes and groceries, fell last month. And sales at sporting goods outlets and department stores barely rose. That partly reflects steep discounting as many shoppers still demand bargains before they buy.

But it also suggests Americans cut back on smaller purchases after splurging on cars and other large items. And it reflects shifts in where Americans do their holiday shopping.

“You can see why traditional retailers were squirming,” Swonk said.

Many large chains and industry groups have issued gloomy reports on the holiday shopping season, including fewer Americans visiting malls and brick and mortar stores compared with last year.

But more people are shopping on their computers. Online and catalog sales rose 2.2 percent in November from the previous month – the biggest month-over-month gain since July 2012. In the past year, online sales jumped 9.4 percent. That’s double the 4.7 percent increase in total retail sales.

Michael Niemira, chief economist at the International Council of Shopping Centers, pointed to another factor that could illustrate the growing health of the consumer. Americans plan to purchase nearly $30 billion in gift cards this year, according to a survey by the retail federation, a record high. Yet purchases of gift cards don’t count as sales in either industry or government data. Those sales are tallied when the cards are redeemed.

Overall, Americans appear to be spending more, which could give a much-needed boost to the economy in the final three months of the year. Consumer spending rose only 1.4 percent in the July-September quarter, the weakest gain in nearly four years.

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