U.S.

Retail Sales Ring Up Big Gain

December 11, 2003 / 9:12 AM EST / CBS/AP

The nation's shoppers descended on stores with a fresh burst of energy last month, propelling retail sales by 0.9 percent. The open-wallet mind-set raised new hope that the overall economic recovery will be durable.

Last month's sizable increase came after retailers' sales dropped by 0.3 percent in September and were flat in October, the Labor Department reported Thursday.

The increase in retail sales in November — the largest advance since August — represented a better showing than economists were expecting. They were forecasting a 0.7 percent rise.

In other economic developments:

The latest consensus forecast by Blue Chip Economic Indicators says the U.S. economy will likely grow at a brisk 4.4 percent in 2004. The 53 professional economic forecasters said 2003 growth will likely hit 3.1 percent. A month ago, the consensus saw 2004 growth at 4.2 percent and 2003 growth at 2.9 percent.

The Labor Department reported new claims for unemployment benefits last week rose by a seasonally adjusted 13,000 to 378,000. But even with the increase, claims were at a level suggesting that the pace of layoffs is stabilizing.

Inventories at U.S. wholesalers grew a seasonally adjusted 0.5 percent in October, the fastest growth this year, the Commerce Department reported. Sales at wholesalers increased 2 percent, the biggest gain in more than four years, driven by a 14.5 percent increase in farm products. Economists expect inventory rebuilding to have a major impact on the economy in the fourth quarter and beyond, as businesses seek to replenish their lean stockpiles to meet growing demand for goods.

The retail sales figures are closely watched since consumer spending accounts for roughly two-thirds of all economic activity. Because of that, consumers play a key role in determining how the recovery unfolds. Consumers have kept their pocketbooks and wallets sufficiently open to keep the economy going even during difficult economic times.

In November, consumers' appetite to spend pushed up sales for many types of goods — from cars and electronics and appliances to health and beauty products.

Excluding sales of automobiles, sales at all other merchants rose for the second straight month by 0.4 percent in November. That showing was slightly stronger than the 0.3 percent rise economists were predicting.

Amid signs that the economy is gaining traction, the Federal Reserve on Tuesday decided to hold a key short-term interest rate at a 45-year low of 1 percent. Near rock-bottom rates may motivate consumers and businesses to boost spending and investment, which would lift economic growth.

The economy grew at a stellar 8.2 percent rate in the third quarter, the best performance in nearly two decades.

Some analysts believe the economy is growing at a slower but still healthy rate of about 4 percent in the current October-to-December period, as some of the stimulus that helped in the third quarter — another round of tax cuts and a wave of mortgage refinancing — fades.

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