U.S. total retail sales in November were +0.8% versus October and +7.7% compared with November of last year, according to the Census Bureau. This indicates underlying strength in consumer buying sentiment and allays many of the worries about the health of the recovery.
Since retail sales can demonstrate considerable volatility from one month to the next, it is often instructive to look at three-month moving averages. On such a “smoothed” basis, U.S. total retail sales in November were even stronger, at +1.1% month to month and +7.8% year over year.
At this time of year, retailers are always concerned about what the holiday shopping season will bring. Last year, coming out of the recession, gift buyers were cautious in their spending habits.
This year, persistent labor and housing market problems have urged caution about the sales outlook. Furthermore, many consumers have been preoccupied with efforts to straighten out their own finances through paying down debt and tearing up their credit cards. Finally, shopping on Black Friday (following the Thanksgiving Day holiday) was solid, but not spectacular.
Nevertheless, considerable encouragement can be taken from the latest retail sales report.
The +7.8% smoothed figure year over year is the second highest since the recession ended in the summer of 2009; only May of this year recorded a higher percentage change, at +8.0%.
Several sub-sectors stood out for exceptional sales growth. Motor vehicle and parts dealers realized a +12.5% actual gain year over year and an even higher 14.9% gain on a smoothed basis. This is the largest individual sub-category, accounting for 18% of total retail sales.
The next largest sub-category is general merchandise stores, at 14% of the total. They usually demonstrate a more even pattern of sales. Their most recent year-over-year performance was +5.0%, almost exactly the same as what total retail sales record in good times over the long-term.
Particularly interesting is what’s happening with non-store retailers (i.e., electronic shopping over the Internet and purchases from mail order houses). Web designers have developed user-friendly (and enticing) selling sites, as well as sophisticated means for price comparisons.
Sales by non-store retailers were +14.2% year over year in November. This category’s percentage of total retail sales now stands at 8.3%. There is little doubt that for some business endeavors, the Internet is taking over. E-books have made a huge impact on publishing sales. Video stores are disappearing to be replaced by downloading and instant streaming of movies.
Consumer spending makes up 70% of U.S. gross domestic product (GDP). November retail sales suggest the consumer will make a big contribution to national output in this year’s fourth quarter.
Retail trade is just one area in which the U.S. has been recording better numbers of late. There are spillover benefits for Canada. The U.S. Conference Board’s latest leading indicator (+0.2% month to month) made a contribution to the similar series calculated by Statistics Canada.
Overall, Statistics Canada’s leading indicator index in November was up 0.3% versus October, the same month-to-month percentage climb as in the period before. The increases in the latest two months are welcome after September’s drop of 0.2%. Canada’s third quarter GDP growth was only 1.0%. It fell below the U.S. level (+2.5%) for the first time since 2009’s third quarter.
The rate of increase of Canada’s leading indicator has slowed versus earlier in the recovery. From July 2009 through August 2010, the average month-to-month change was +0.9%. Rapid increases are to be expected early in a recovery. In normal times, +3.0% to +5.0% is typical.
In November, the index received a particular boost from the housing sector (+2.0%), as both existing home sales and new home starts stabilized after faltering in the middle months of 2010.
Canada’s financial indicators were also positive, with S&P/TSX share prices +2.8% month to month and the money supply +0.5%. New orders in durables manufacturing (+0.7%) and other durbable goods retail sales (+0.9%) rounded out the positive influences on the leading indicator.
Holding back the advance was a decline (-0.4%) in business and personal services employment.