The mighty U.S. consumer puts the economy on their back

Per the Wall Street Journal:

U.S. retail sales surged in November, making a surprisingly strong, broad-based climb that suggests the economy might not be as weak as feared.
…
Retail sales increased by 1.2%, the Commerce Department said Thursday, compared with an unrevised 0.2% in October.

The median estimate of 10 economists surveyed by Dow Jones Newswires was a 0.6% advance in November. Analysts have been expecting consumer spending -- and the economy as a whole -- to slow sharply in the final months of 2007 compared with the third quarter amid falling home prices and rising energy costs.

Sudeep Reddy blogs at the WSJ:

· Retail sales figures pushed Morgan Stanley’s fourth-quarter GDP estimate to 1% from 0.2%, and then the increase in business inventories pushed the tracking figure to 1.2%.
· Lehman Brothers raised its growth estimate to “close to” 1% vs. the previous 0.1%. “This dramatically reduces the odds of a negative print during the quarter and suggests that second half growth could average as high as 3%,” its economists said.
· J.P. Morgan economists boosted their growth estimate to 1.5% from 0.5% previously due to surprises in retail sales, government military spending and inventory growth figures. At the same time, however, they lowered their forecast for the first quarter of 2008 to 1% from 1.5% as the stronger demand in the current quarter “is viewed as borrowing from the start of next year.”

Here are 2 Retail Sales charts with and without auto sales. Taking out auto sales removes some of the volatility especially month over month (red bars). Click on the chart to make it bigger.

Background on Retail Sales

The advance report is published by the U.S. Census Bureau around the 11th to 15th of each month for the previous month's numbers. The December advance numbers are scheduled to be announced on January 15, 2008. At that time they will announce the “preliminary” November numbers and the “revised” October figures. There is also a revision released annually every spring.

The sales report measures sales at retail stores. The report is often viewed excluding motor vehicles. Attention is also paid to the gas and food components where changes can be more of product of changes in prices than changes in demand.

Sales makes up about half of personal spending which in turn makes up about two thirds of US GDP . Total personal spending (including services) will be announced in the the personal income and spending reports on December 21, 2007.

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