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BusINess » Business Consumer » Consumers give holiday shopping season a big start

Consumers give holiday shopping season a big start

Shoppers take advantage of sales while shopping during Black Friday at the Pentagon City Mall in Arlington, Va. Retail sales rose for a fifth straight month in November as the biggest jump in department store sales in two years got the holiday shopping season off to a jolly start. (AP Photo/Susan Walsh)

Shoppers take advantage of sales while shopping during Black Friday at the Pentagon City Mall in Arlington, Va. Retail sales rose for a fifth straight month in November as the biggest jump in department store sales in two years got the holiday shopping season off to a jolly start. (AP Photo/Susan Walsh)

Retail sales rose for a fifth straight month in November, suggesting a strong holiday shopping season and raising hopes that consumers will boost the economy in the coming months.

The best month for department stores in two years helped lift retail sales 0.8 percent last month, the Commerce Department said Tuesday.

November’s sales figures were better than economists had expected, prompting many to revise their forecasts for consumer spending growth in the October-December quarter. Still, many cautioned that the economy needs more hiring and higher pay to sustain those spending gains in the new year.

That may not be too far away, according to a new survey of executives of America’s largest companies. It found that 45 percent plan to hire within six months—the highest percentage for that group in eight years.

The Business Roundtable survey was released a day before President Barack Obama is to meet with a group of corporate executives to discuss job creation and making the U.S. more competitive. It also comes as Congress is on the verge of passing legislation that would extend the Bush-era tax cuts for two years, lower payroll taxes for workers and extend unemployment benefits through the end of 2011.

The economic news Tuesday was not all bright. Best Buy Co. said its quarterly net income, covering a three-month period ending Nov. 27, fell more than expected. The company, the largest U.S. electronics chain , said it lost sales of TVs and laptops to competitors. Best Buy also reduced its full-year outlook. Its shares fell nearly 14 percent in midmorning trading.

A big benefit for shoppers is that inflation remains tame. The Labor Department said wholesale prices rose 0.8 percent in November, reflecting a jump in energy prices. But core inflation, which excludes volatile energy and food prices, ticked up only 0.3 percent.

And businesses are continuing to replenish their stockpiles—a trend that helped lift the country out of the recession. Inventories rose 0.7 percent in October. It was the 10th straight monthly gain.

Sales by manufacturers, wholesalers and retailers rose 1.4 percent in October, the best showing in seven months. Stronger rebuilding of stockpiles and sales suggest factories will see rising orders in coming months.

Consumer spending is closely watched because it accounts for 70 percent of total economic activity. A drop in retail sales in May and June had raised fears that the economy could be in danger of slipping back into recession.

But since then, sales have posted five straight increases. Several economists said the improvement in retail sales and the pending tax-cut package making its way through Congress were prompting them to revise up their estimates for consumption spending for the October-December quarter and the first part of 2011.

Theresa Chen, senior economist at Barclays Capital, said that the strong retail sales in both October and November had pushed her tracking estimate for consumer spending and overall economic growth up to 3.5 percent for the fourth quarter. That’s up from 3 percent prior to the strong retail sales report.

“The continued improvement in retail sales is indicative of a consumer that continues to gradually rebuild confidence that was shattered by the credit crisis,” said Jim Baird, chief investment strategist for Plante Moran Financial Advisors.

But Paul Dales, senior U.S. economist at Capital Economics, said that the current spending gains may not last unless job growth picks up.

“This tentative consumer revival may not be the start of a prolonged period in which households become the engine of the economy once again,” he said, noting that the weak job growth means personal incomes, after adjusting for inflation, are rising by less than 1 percent. That’s far below what is needed to support strong spending gains.

The 2.8 percent rise in department store sales represented a solid rebound from a 0.9 percent drop in October.

Analysts said that heavy holiday discounting, which started as early as October, and an improving economy were helping to boost spending.

Even the weather was playing a part. The arrival of cold weather in November, after two months of unseasonably warm weather, helped to boost sales of coats and other cold-weather gear.

Retail sales also got a lift in November from a rise in gasoline prices. That pushed up sales at service stations by 2.7 percent.

Specialty clothing stores sales rose 2.7 percent, after a 1.2 percent gain in October. Sales at general merchandise stores, a category which includes big retail chains such as Wal-Mart and Target, increased 1.3 percent—an improvement from the 0.3 percent rise in October.

Sales were down in November at furniture stores, appliance stores and hardware stores.

Auto sales slipped 0.8 percent. But that came after a sizable 5.8 percent surge in October sales by auto dealers.

The holiday shopping season accounts for as much as 40 percent of annual revenue and profits for retailers. In an effort to spur demand, many stores trotted out the Black Friday discount stickers on selected merchandise as early as late October.

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