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November Retail Sales Suggest Strong Holiday Season

Retail sales gains in November started the holiday season off on a positive note.

November retail sales reached a seasonally adjusted $513.5 billion in November, a 0.2 percent sales increase over October 2018 and a 4.2 percent increase over the prior-year period. The U.S. Department of Commerce report provides the first evidence that the predictions for a strong 2018 holiday sales period may be on track.

The month over month uptick in sales follows a robust October, which had been reported as up 0.8 percent over September and has since been adjusted to up 1.1 percent.

After a 0.5 percent pickup in sales from September to October, sales in clothing and accessories stores slowed by 0.2 percent in November. The channel reached $23.23 billion in sales, a 4.1 percent increase over the prior year period. Department stores achieved a 0.4 percent gain for the month on top of a 1.3 percent increase over September. Despite the increase, the sector lagged behind the November 2017 performance by 0.2 percent.

So-called non-store retail sales, which are primarily comprised of online sales, topped out at $59.99 billion, representing a 2.3 percent boost over the prior month and a 10.8 percent increase over November 2017.

On the other end of the spectrum, building materials along with garden supplies showed a 0.3 percent decline in sales for the month while food services declined by 0.5 percent when compared to October 2018. The biggest drop in sales was seen at the pump, with gas station sales down 2.3 percent from the previous month. Sales in that sector are still up by 8.2 percent over the prior-year period, however.

The National Retail Federation said the positive retail sales results support the organization’s prediction that holiday sales this year would rise between 4.3 percent and 4.8 percent this year over last to between $717.45 billion and $720.89 billion. NRF chief economist Jack Kleinhenz said low unemployment, higher wages and tax cuts are among the factors inducing shoppers to spend.

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“Consumers have the capacity and confidence to spend this holiday season,” he said in a release. “This is a good start to the holiday season and consistent with our outlook. Consumer spending remains solid and clearly provides evidence that the economy is healthy as we head into 2019.”

Moody’s also confirmed the sales performance indicates the holidays will be strong and provide opportunities for retailers to capitalize on the health of the U.S. consumer and willingness to spend.”

The credit ratings firm cautions that sales don’t necessarily mean margins—especially if retailers have to discount heavily to achieve those transactions. “As always, given our focus on operating income performance over sales, the key factor will be the ‘deepness’ of promotions necessary to drive these favorable sales results, which is to be determined.”