Retail Sales Up 0.7% in November

The Commerce Department said on Thursday retail sales increased 0.7 percent last month after rising by a revised 0.6 percent in October. November's retail sales increase was the largest in five months.

Economists polled by Reuters had forecast retail sales, which account for about 30 percent of consumer spending, advancing 0.6 percent after a previously reported 0.4 percent gain in October.

So-called core sales, which strip out automobiles, food services, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, increased 0.5 percent after rising 0.7 percent in October.

That suggested consumer spending would likely step up from a two-year low touched in the third quarter.

Spending is being supported by solid employment gains and steady income increases, which could help limit the drag from inventories on fourth-quarter GDP growth. Lower gasoline prices are also helping, though they are a drag on retail sales figures.

The steady stream of fairly upbeat data should give the Fed confidence to start cutting back its monthly $85 billion bond buying program at least by March.

Retail sales last month were buoyed by a 1.8 percent jump in receipts at auto and parts dealers. That helped to offset a 1.1 percent drop in sales at gasoline stations.

Receipts at building materials and garden equipment stores rebounded 1.8 percent after falling 1.5 percent in October.

There were also gains in receipts at furniture, electronics and sporting goods shops, among others. Sales at electronics and appliance stores rose 1.1 percent, while furniture store sales rose 1.2 percent. However, receipts at clothing stores fell 0.2 percent after rising 2.6 percent in October.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Fresh Ink: Inside Today's Legal - November 29

Can't find a paper, but want a sneak peek at the stories inside The Legal this morning? Consider this your personal delivery service.

Fresh Ink: Inside Today's Legal - November 28

Can't find a paper, but want a sneak peek at the stories inside The Legal this morning? Consider this your personal delivery service.

Fresh Ink: Inside Today's Legal - November 30

Can't find a paper, but want a sneak peek at the stories inside The Legal this morning? Consider this your personal delivery service.

Fresh Ink: Inside Today's Legal - November 26

Can't find a paper, but want a sneak peek at the stories inside The Legal this morning? Consider this your personal delivery service.

Fresh Ink: Inside Today's Legal - November 30

Can't find a paper, but want a sneak peek at the stories inside The Legal this morning? Consider this your personal delivery service.

Storm Slowed Hiring in November, but Services Sector Grew

The ADP National Employment Report, which is closely watched as it comes two days ahead of the government’s monthly national employment report, showed on Wednesday that the private sector added 118,000 jobs during the month, below expectations for a gain of 125,000.

The report largely reinforced economists’ forecast for a weak reading in the Labor Department’s payrolls report on Friday. Economists expect the economy added 93,000 jobs in November, down from 171,000 the month before, according to a Reuters survey.

“It’s close to what the market was expecting. If Friday’s employment report from the U.S. Labor Department comes in similar to this, that would be a good outcome,” said Terry Sheehan, an economic analyst at Stone & McCarthy Research Associates.

Wednesday’s data, which also included better-than-expected factory orders and productivity, presented a mixed picture of the American economy. That was partly a reflection of crosscurrents from the storm, as well as difficult budget negotiations in Washington aimed at averting the so-called fiscal cliff, a series of automatic government spending cuts and tax increases at the beginning of next year.

A report on the American services sector showed a similar slowing in hiring during the month. But forward-looking indicators pointed to faster growth as a rise in new orders and business activity helped offset a slowdown in employment and prices.

The Institute for Supply Management said its services index rose to 54.7 last month from 54.2 the month before. The reading topped economists’ forecasts for growth to 53.5, according to a Reuters survey. In the report, 50 marks the divide between growth and contraction.

“The much larger service side of the U.S. economy remains relatively healthy,” said Joseph Trevisani, chief market strategist at Worldwide Markets. “It has so far avoided the contraction in manufacturing, but worse is probably coming in the first quarter of next year as the economy continues to slow.”

Also on Wednesday, a report showed new orders received by factories unexpectedly rose 0.8 percent in October as demand for motor vehicles and a range of other goods offset a slump in defense and civilian aircraft orders. The Commerce Department also revised October’s figures upward on nonmilitary capital goods orders excluding aircraft in a hopeful sign that the slowdown in business investment in recent months might soon draw to a close.

Economists at Barclays said the strong reading, driven by orders and shipments of capital goods, equipment used to make other things, means the economy will grow faster than expected in the fourth quarter. They raised their gross domestic product growth outlook for the quarter to 2.2 percent from 2 percent.

The Labor Department reported that nonfarm productivity increased at an annual rate of 2.9 percent in the third quarter, a faster clip than initially expected, as businesses held the line on hiring even as output surged, with unit labor costs falling at their fastest pace in almost a year.

With the effects of the storm out of the way in the months ahead, hiring is expected to return to its previous trend even if more slowly than most would like to see with the employment rate still hovering near 8 percent.

Mark Zandi, chief economist of Moody’s Analytics, who helps compile the ADP report, said underlying jobs growth was closer to 150,000 in November after discounting the impact of the storm as well as seasonal jobs brought forward at the start of the holiday season.

“Abstracting from the storm, the job market turned in a good performance during the month,” he said. “Superstorm Sandy wreaked havoc on the job market in November, slicing an estimated 86,000 jobs from payrolls.”