Americans Spend More Than Expected as Holiday Season Heats Up

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Americans are spending more than expected this holiday season, fueled by income gains, confidence in the economic outlook, buoyant financial markets and modest inflation.

The boost includes in-store and online spending at brick-and-mortar retailers such as Wal-Mart Stores Inc. and Nordstrom Inc., which clocked the largest year-over-year November sales increase in seven years. Home-furnishing stores and electronics-and-appliance stores also logged strong spending numbers, despite competition from online-shopping websites, which also posted robust gains.

“It’s an impressive start to the holiday season and probably the best in the last few years,” said Jack Kleinhenz, chief economist at the National Retail Federation, a group that represents retail stores. “When you put the pieces together, job and wage gains, modest inflation, healthy balance sheet and elevated consumer confidence…there’s an improved willingness to spend.”

Altogether, sales at online retailers, brick-and-mortar stores and restaurants rose 0.8% in November from the prior month, well above the 0.3% increase economists surveyed by The Wall Street Journal had expected. That was up 5.8% from a year earlier, the largest yearly November increase since 2011. Despite their woes from online competition, general merchandisers such as department stores fared well, registering a 3.6% sales increase from a year earlier, the best November performance since 2010.

“Overall these data are much stronger than expected,” said Ian Shepherdson, an economist at Pantheon Macroeconomics, in a note to clients. “People have the inclination and the wherewithal to continue spending at a robust pace.”

Taken altogether, the data suggest the U.S. is on track for robust growth in the fourth quarter. Macroeconomic Advisers, a forecasting firm, estimated the economy is growing at a 2.8% annual pace in the October-to-December period, up from a 2.6% forecast before the retail-data release. The Federal Reserve Bank of Atlanta estimated a 3.3% growth rate.

One caveat: Spending is so strong it is outpacing income gains, meaning Americans are saving at a slower rate, which could lead to a spending slowdown later or the threat of rising debt levels.

Spending comparisons to last year were boosted by a weak holiday season in 2016 for retailers, which were plagued by high inventories and a slowdown in purchases by international tourists amid a rising dollar.

This year, some brick-and-mortar stores appear to be better managing their inventory. In their most recent quarter, both Macy’s Inc. and Kohl’s Corp. said their stores had less excess merchandise to clear out at steeply reduced prices. “We don’t have the albatross of a lot of extra inventory like we did last year,” Macy’s Chief Executive Jeff Gennette said in an interview on Black Friday. That, in turn, resulted in less discounting, Mr. Gennette said.

Mr. Kleinhenz said increasingly sophisticated website and app advertising is helping brick-and-mortar retailers too. “It’s a combined strategy that retailers have developed that integrates the use of the internet with the brick-and-mortar shopping approach,” he said.

The retail industry is undergoing another major shift — to e-commerce. How did we get here? Photo: Associated Press Related Video

Since Nov. 1, online revenue has risen 24% compared with the same period last year, said Slice Intelligence, a research firm that tracks online purchase receipts. Online sales at Target Corp., Kohl’s Corp. and Costco Wholesale Corp. rose the fastest, the firm said, though Amazon continued to grow rapidly from a larger sales base.

Better-than-expected quarterly results were reported by some mall stalwarts that have been battered, including Macy’s Inc. and Gap Inc. “There is a consolidation taking place” in the apparel market, Gap CEO Art Peck told analysts on Nov. 16. “Almost regardless of consumer sentiment, we’ve got an opportunity to drive growth and gain market share,” Mr. Peck said, as the company closes stores, remodels others and speeds up its product pipeline.

The closure of thousands of stores this year could be giving those left standing a boost.

“On an overall basis, a portion of our improvement in our sales trend is attributable to our targeted efforts to capture share from competitive store closures in some of our trade areas, and we expect this will continue, if not accelerate, through the holiday season,” Kohl’s CEO Kevin Mansell told analysts in November.

Some businesses, meanwhile, are feeling a boost from the stronger labor market. Pete Benck, owner of Madison, Wis.-based vintage clothing store Good Style Shop, said this holiday season’s business has been stronger than last year’s.

“We have had a lot of foot traffic, and I think there’s a lot of confidence in our consumers lately,” Mr. Benck said.

The National Retail Federation expects consumers nationwide to spend about 4% more during the holiday shopping season than they had in 2016. That would make 2017 the strongest holiday season since 2014. Mr. Kleinhenz said the U.S. appears to be on track to meet that goal.

Sarah Nassauer Wall Street Journal

Yahoo Finance!

Write to Sharon Nunn at sharon.nunn@wsj.com

Photo credit:Black Friday shoppers sort through their purchases while waiting for their rides at The Mall at Turtle Creek in Jonesboro, Ark. Americans, by most measures, appear ready to shop this holiday season. (Staci Vandagriff/The Jonesboro Sun via AP, File)

Retailers Hope For Strong Holiday Season As November Sales Beat Expectations

U.S. retailers are looking forward to a strong holiday season this year after new numbers show higher than expected sales for November.

The Commerce Department said Thursday that retail and food sales were up 5.8 percent last month over November 2016, according to advance estimates. And, sales were up a seasonally adjusted 0.8 percent from October of this year.

“This has been an impressive start to the holiday season, perhaps the best in the last few years,” Jack Kleinhenz of the National Retail Foundation said in a statement. The group, which represents retail stores, released its own similar estimates Thursday. “The combination of job and wage gains, modest inflation and a [healthy] balance sheet along with elevated consumer confidence has led to solid holiday spending by American households,” he added.

According to The Wall Street Journaleconomists had predicted only a 0.3 percent increase in sales for November.

Sales were up 2.1 percent over the previous month at electronics stores and 1.2 percent at furniture stores, the agency reported.

Surveys show customers are the most confident they’ve been since 2000, according to The Associated Press. The most recent unemployment report from the Bureau of Labor Statistics put the country’s unemployment rate at 4.1 percent in November, the same as it was in October. It’s the lowest unemployment rate since before the economic recession that began a decade ago.

In a sign of confidence in the economy, the Federal Reserve raised interest rates this week for the third time this year and the fifth time since the economic crisis.

Though to add some caution to the optimism, the Journal noted that strong spending “is outpacing income gains, meaning Americans are saving at a slower rate, which could lead to a spending slowdown later or the threat of rising debt levels.”

The newspaper also said that “high inventories and a slowdown in purchases by international tourists amid a rising dollar” contributed to a poor holiday season for retailers last year.

The National Retail Federation said sales for this year’s holiday season, which they define as November and December, “are on track to meet or exceed NRF’s holiday sales forecast for an increase between 3.6 and 4 percent over last year.”