WASHINGTON -- Retal sales rose a modest 0.4% in November as consumers cut back on auto purchases but continued to buy home furnishing and other durable goods, the Commerce Department reported yesterday.
The increase, which conformed to market expectations, followed a revised 1.8% rise in October sales that was even more sizzling than the 1.4% gain originally reported.
"Overall taking the two months together, consumer spending books quite solid, and we will see a relatively good pattern for the Christmas season," said Lynn Reaser, chief economist for First Interstate Bancorp. in Los Angeles.
"The fact you had any increase in November after that tremendous surge in October is good news. It's a big-ticket-item month," said David Wyss, senior vice president for DRI/McGraw-Hill Inc. in Lexington, Mass.
Retail sales have now advanced eight months in a row, the longest string since a nine-month run from April to December in 1992. Commerce officials said.
Economists believe the rapid pace of consumer spending will help boost fourth-quarter U.S. growth to 4% or more, but they also say spending is being fueled hy heavy use of credit cards and cash from home refinancing that cannot be sustained over the long haul.
"Consumers are out there spending money, and lots of it," Wyss said. "They got their credit cards out, and if anything, I'm concerned they're spending beyond their means. We're looking for a slowdown in the first half of next year, but not a major retrenchment, as people let their incomes catch up."
The Commerce figures showed particular strength in sales of durable goods, notably building materials and home furnishings. Analysts said both sectors reflected the brisk pace of new home sales and the strength in residential construction as consumers continue to take advantage of low interest rates.
Compared to a year earlier, furniture sales were up 13% while building materials sales increased 17%. Auto sales have also been strong, advancing 14% compared with a year earlier.
However, auto sales slipped 0.1% in November after buyers filled dealer showrooms searching for new models in October and pushed up sales 5%. Excluding autos, retail sales were up 0.5% afte a gain of 0.9% in October.
Separately, the Commerce Department reported that the trade sector continued to dampen U.S. economic growth in the third quarter. The current account balance, the broadest measure of trade performance that includes services and investment flows, widened sligthly to $28.0 billion from $27.2 billion in the second quarter.
The deficit on merchandise trade increased to $36.3 billion, more than doubling a $14.1 billion surplus in banking and other services.
In the investment accounts, net U.S. purchases of foreign securities jumped to a record $45.3 billion as bond purchases hit $20.9 billion. Net foreign purchases of U.S. Treasury securities totaled $4.0 billion, while purchases of bonds and other securities rose to $17.4 billion.