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Retail sales boost growth prospects (Reuters)

WASHINGTON (Reuters) – Retail sales were stronger than expected in November as consumers shopped despite high unemployment and producer prices rose, evidence the economic recovery gathered steam in the fourth quarter.

The Commerce Department said on Tuesday total retail sales increased 0.8 percent, advancing for a fifth straight month, as consumers snapped up clothing and other items at the start of the holiday season and receipts at gasoline stations surged.

In addition, sales for October were revised up to 1.7 percent from a 1.2 percent gain. The sturdy rise in sales was a boost for consumer spending, which accounts for more than two-thirds of U.S. economic activity.

Economists, who had expected retail sales to increase 0.6 percent last month, said even if sales stumbled in December, consumer spending was likely to far exceed the 2.8 percent annual growth rate recorded in the July-September period.

“Consumption is likely to post a solid rise in the fourth quarter. For the first time since the recession ended, consumers are contributing to growth in a real way,” said Chris Low, chief economist at FTN Financial in New York.

Economists scrambled to raise their fourth-quarter economic forecasts based on the solid showing by consumers, although the data was not expected to weigh heavily at a meeting of Federal Reserve officials on Tuesday.

A separate report from the Labor Department showed producer prices increased 0.8 percent last month, above forecasts for a 0.6 percent gain. Core wholesale prices, which exclude volatile food and energy prices, rose 0.3 percent.

U.S. stocks opened marginally higher and gains were curbed by a weak earnings report from Best Buy Co Inc. The top consumer electronics chain reported a decline in quarterly results and same-store sales and cut its full-year outlook, citing weak demand in its key U.S. market.

GROWTH LIKELY PICKED UP IN Q4

The economy expanded at a 2.5 percent annual pace in the third quarter and data so far suggest the rate of activity accelerated in the current quarter.

However, it will probably not be strong enough to discourage the Fed from completing its $600 billion government debt buying program intended push already low interest rates further down and stimulate demand.

Sales excluding autos increased 1.2 percent last month, the largest gain since March and exceeded economists’ expectations for a 0.6 percent gain. Sales excluding autos increased 0.8 percent in October.

Sales last month were buoyed by a 2.7 percent rise in receipts at clothing and clothing accessories stores, the largest increase since March.

Consumers also spent on non-essential goods, lifting sales at sporting goods, hobby, book and music stores 2.3 percent, the biggest gain in almost a year.

Sales were also boosted by a 4 percent jump in receipts at gasoline stations, which was the largest gain in a year. But motor vehicle sales surprisingly fell 0.8 percent, while building materials dipped 0.1 percent after rising 3.3 percent in October.

Core retail sales, which exclude autos, gasoline and building materials, rose 0.9 percent after a 0.5 percent gain in October.

Core sales correspond most closely with the consumer spending component of the government’s gross domestic product report. Economists expect the tax deal struck last week by the Obama administration and Republican lawmakers will boost spending next year.

“If the proposed payroll tax cut makes it into law, consumption growth could be fairly good in the first quarter of next year too,” said Paul Dales, a U.S. economist at Capital Economics in Toronto.

Other weak spots in the retail sales report included purchases at electronics and appliance stores, which fell 0.6 percent last month and furniture sales declined 0.5 percent.

In a second report, the Commerce Department said business inventories rose 0.7 percent to $1.42 trillion in October, the highest level since February 2009, after increasing 1.3 percent in September.

Economists polled by Reuters had forecast inventories rising 1 percent. Business sales increased by 1.4 percent to $1.12 trillion in October, the highest level since September 2008, after rising 0.8 percent the prior month. The percentage increase in sales last month was the largest since March.

(Additional Reporting by Pedro Nicolaci da Costa; Editing by Neil Stempleman)

It, Retail sales boost growth prospects
(Reuters)
quoted from US Economy

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