Economy 13 Dec 2006 04:56 pm
Along with the news about possible airline consolidation the other surprise news was the growth in retail sales:
Showing surprising strength, seasonally adjusted U.S. retail sales increased by 1% in November, the first gain since July, the Commerce Department reported Wednesday.
Excluding the 0.9% gain in motor vehicle sales, retail sales rose 1.1%, the largest gain since January.
Sales were much stronger than the 0.2% gain expected by economists surveyed by MarketWatch. They expected sales excluding autos to rise 0.3%.
Economists and forecasters are pulling late nights recalculating their models.
Those few shoppers that did make it to the stores must have spent a ton–probably on HDTVs (electronics store sales jumped 4.6%). That fits with Dr. Peter Morici’s view:
Sales of upscale items remain strong. These are powered by recent stock market gains and strong employment and pay increases for professionals and managers well positioned to benefit from globalization, for example in investment banking, law, top levels of corporate management, and accounting.
He calls today’s numbers “decent but modest gains” but “not enough to power robust economic growth.”
Or maybe Britt Beemer isn’t as good of a retail analyst as he thinks he is.
The AP quotes Joel Naroff, chief economist at Naroff Economic Advisors: “No matter what the retailers may be saying, it appears that consumers have taken out their wallets so far this holiday season.” In other words, numbers don’t lie, but they can be revised.
One retail researcher sees a lackluster Christmas shopping season:
Spot checks at shopping centers throughout the last week found foot traffic lackluster by several holiday-shopping-period comparative measures. Britt Beemer, founder of America’s Research Group, was so worried that he lowered his sales-growth estimate to 2.7% from 3.1%.
“The lack of a ‘must-have’ item for Christmas and the lackluster way retailers have approached the Christmas season this year compels me,” Beemer said.
It is only the fourth time in his 20 years of forecasting that he’s trimmed his holiday forecast.
“Shoppers are just not seeing the excitement at the stores,” he added.
Or they might be playing a particularly hard-nosed game of chicken with retailers during the most crucial shopping period. Many retailers ring up 40% to 60% of their annual profit during the November-December period, with some reaping as much as 80%.
Along with no “must-have” item (funny, HD TVs did well on Black Friday) Beemer’s survey found shoppers were disappointed in the lack of store help.
If shoppers wait to buy retailers might have to really slash prices to draw them in. That would cut their margins, hurting profits. Not good for retail stocks. A recent trend that’s helped retailers has been the rise of gift cards. It’s extended the shopping season from shortly after Christmas through the time kids, who get the cards, head back to school. Just make sure you don’t get scammed.
Fed Chairman Ben Bernanke’s worry about inflation while considering the cooling housing market makes many think the Fed will hold interest rates steady:
“We do not expect the FOMC at Tuesday’s meeting to depart from Chairman Bernanke’s recent message that spillovers from the housing downturn will stay limited and inflation risks still predominate,” Goldman Sachs Chief U.S. Economist Jan Hatzius said in a note to clients.
Bernanke called core inflation “uncomfortably high” in a speech on Nov. 28, adding there were risks prices would not recede in spite of the drags on growth from slowing housing markets and weakness at auto plants and other factories.
Fed Vice Chairman Donald Kohn renewed the warning on inflation early this month, saying that while policy-makers expect inflation to ease, “the risks around that expectation are tilted to the upside,” suggesting the U.S. central bank sees a greater chance of rates rising than falling.
Kohn pointed to tight labor markets and an economy that, while growing more slowly than at the beginning of the year, is expanding at a pace not that far below the speed limit for keeping inflation under control.
People holding down ARMS are breathing a sigh of relief. They still have time to lock down their mortgage rates.
[Graphic via WILLisms.com]