After several holiday seasons of pronouncing ”humbug” while toting up meager sales, retailers are beginning to think they will find a little something extra under the Christmas tree this year: healthy profits.
The latest indicator that things are looking better was Commerce Department figures for November that showed retail sales rising 1.1 percent to $138.05 billion.
The figures, released Tuesday, showed ”strength on strength” said Robert Dederick, executive vice president and chief economist of Northern Trust Co. of Chicago.
”Sales were strong across the board, and there was a big upward revision of the figure for a month earlier,” he said.
October retail sales were revised upward to a growth rate of 1.6 percent, after previously being reported as up 0.9 percent. Since fall began, retail sales have been strengthening after more than a year of lackluster department store sales.
Dederick noted that car sales have been extremely strong, sales of furniture and appliances have picked up and apparel sales keep rising.
”Consumers keep finding new money in their pocketbooks and they spend it quickly,” he said.
Analysts were expecting Novermber sales to rise 0.5 percent, or less than half the actual figure. The much larger gain was seen as another signal that the economy is steaming along as the expansion enters its seventh year.
However, that has stirred new inflation worries.
”Don`t forget, the faster you run, the greater the danger you will trip,” Dederick said. ”In this case, that could mean the Federal Reserve will find it necessary to trip consumers by tightening credit.”
Though generally finding the retail sales report to be encouraging, economists cautioned that, in exchange for higher sales, some stores are offering steep discounts. Thanks in part to huge leveraged buyouts in the retail industry, some managers are willing to trade smaller profit margins for immediate cash.
There also have been isolated complaints that, though aisles in department stores are crowded, buyers are focusing on items that cost $50, instead of big-ticket purchases of $500 or more.
”Some store managers still are complaining that sales aren`t meeting projections,” said John Sherry, associate professor of marketing in the Kellogg Graduate School of Management at Northwestern University.
”Some consumers are displaying uncertainty, worrying about the presidential transition in Washington and the problems facing the economy,”
he said.
To lure buyers in the 11 days until Christmas, stores are offering personalized shopping help and adopting other strategies to make gift-buying more meaningful, Sherry said.
”They are trying to package an experience-presenting an environment and an atmosphere that makes buying a gift almost a gift in itself,” he said.
”Buyers want to show that they are investing part of themselves in gift-giving. They aren`t walking into stores with a preconceived idea about what they should buy.”
The Commerce Department numbers showed evidence of solid buying in the week of Thanksgiving, the traditional start of the Christmas-shopping season. Car sales rose 2 percent last month after increasing 4.6 percent in October. Department store sales were up 0.8 percent in November after rising 2.9 percent in October.
Sales of durable goods, ”big ticket” items intended to last three or more years, rose 1.8 percent in November after a 2.5 percent October gain. Non-durable goods climbed 0.7 percent after a 1.1 percent advance.
Hardware, garden and building supply store sales surged 2.8 percent and furniture sales increased 1.2 percent.
Food and grocery stores reported a 0.7 percent increase, specialty clothing stores a 1.7 percent rise, drug stores a 1.3 percent gain and restaurants and bars a 1 percent increase.
The only category reporting a decline was gasoline service stations, where sales fell 1.4 percent.
The October increase matched a 1.6 percent gain in March and was the strongest since a 1.8 percent gain in August.
Evidence that the economy is picking up after a summer slowdown has raised concern at the Federal Reserve Board.
Members of the Fed`s policy-making Open Market Committee were scheduled to meet Tuesday and Wednesday, with economists wondering whether steps might be taken to tighten credit and forestall inflation.
