Retail Sales Surge

The consumer is in gear for the holidays as a very strong retail sales report lifts the outlook for fourth-quarter consumer spending. Retail sales surged 0.8 percent in November which is far beyond expectations and is 3 tenths over Econoday's high estimate. The data include a strong upward revision to October which now stands at a 0.5 percent gain vs an initial increase of 0.2 percent.

November's strength comes despite a 0.2 percent decline in auto sales excluding which sales rose a full 1.0 percent. Core readings underscore all the strength: up 0.8 percent for both ex-auto ex-gas and for the control group.

Most major components outside of autos show gains including a standout 2.5 percent jump in nonstore sales which speaks to unusual strength in e-commerce. Electronics & appliances appear to be early holiday favorites with these stores reporting a 2.1 percent jump on top of a 1.2 percent rise in October. Price discounting for apparel that was evident in yesterday's consumer price report did not hold down totals for clothing stores which gained 0.7 percent for a second straight month. Restaurants also show strength, up 0.7 percent following October's 0.4 percent rise.

Consumer spending proved a little soft in the third-quarter GDP report at only 2.3 percent annualized growth but today's report, including the revision, is certain to lift the outlook for fourth-quarter GDP. And it may even encourage talk that the economy, fed by unusual strength in the labor market, could be at the risk of overheating.

Recent History Of This Indicator:
After jumping on hurricane-driven gains for autos and gas, retail sales settled back to earth in October with only a 0.2 percent gain and mostly moderate details throughout. For November, unit auto sales slowed which points to trouble for the motor vehicle component. Special interest will be paid to department store and nonstore data to measure the success of Black Friday and Cyber Monday. Retail sales in November are expected to rise 0.3 percent with ex-auto sales much higher at 0.7 percent. Two core readings -- less auto & gas and control group sales -- are both expected to post solid increases of 0.4 percent.