WASHINGTON -- U.S. consumers may be getting ready to step up spending and help assure a modest but solid economic rebound.
Analysts said they took some holiday cheer in Friday's report from the Commerce Department showing that retail sales were stronger than expected. November sales rose an unspectacular 0.4%, but revised October sales were up a surprising 1.9%, more than double the 0.9% rise that was originally reported.
Retail sales have now advanced five months in a row. Moreover, economists said the preliminary survey for the University of Michigan's consumer confidence index climbed to 91.4 in early December from 85.3 in November. The index uses a base of 100.
The latest figures were in line with others that have shown a reviving economy, in some cases with upward revisions to government statistics that have caught analysts by surprise.
"I think the economy is starting to pick up, and we should be in for a decent year in 1993," said James Solloway, chief economist for Argus Research Corp.
"Perhaps it's an indication that things are turning when the government bean counters are under-estimating the pickup," he said.
Last month, the bond market was caught off guard when the Commerce Department revised third-quarter U.S. output to show an increase of 3.9%, the fastest pace in four years. And sales of new single-family home sales have been revised up all year.
"It's the strength in consumer spending that is heartening," said Solloway.
He added that with manufacturing firms reporting low inventories and high levels of hours worked, the stage could be set for firms to step up hiring.
"If we continue to see decent demand from consumers, then we are likely to see an increase in the work force because companies can't produce that much more without hiring more workers," said Solloway. "That could set in train a sustainable rise in employment and production, which is what recoveries are all about."
Analysts caution that employment gains are vital to insuring personal income increases that get people to spend more and feel more confident. The unemployment rate has come down in recent months, but it remains high at 7.2%.
"Consumer confidence is supporting a little bit of spending," said Cynthia Latta, senior financial economist for DRI/McGraw-Hill. "That doesn't put money in people's pockets, but you can spend hope if you have a credit card."
The Federal Reserve Board reported last week that consumer credit advanced in October, the second straight rise after declining most of the year.
Meanwhile, analysts seem to be sticking to the consensus view that any economic revival will be modest. Latta said the forecast at DRI/McGraw-Hill calls for growth of 2.5% in 1993, up from 2.0% this year.
Sally Kleinman, an economist with Chemical Securities Inc., said much of the rise in November retail sales seemed to come from post-Hurricane Andrew rebuilding and unusually high restaurant receipts. And, she said, it remains to be seen if the Christmas season buying that retailers are hoping for comes to pass.
Still, Kleinman said in a market letter, "it is clear that consumer spending has picked up in recent months."
Analysts also liked the Labor Department's report on Friday that the consumer price index rose a modest 0.2% in November, marking an annual inflation rate of 3.1% for the year to date.
Nearly all components of the index retreated from October, when the index hit an uncomfortably high 0.4%.
"I think it's safe to say we're in a modest recovery period, and growth won't be enough to give us any inflationary pressures," said Kevin Flanagan, an economist with Dean Witter Reynolds Inc. "All in all, it's a good environment.
