Upbeat U.S. Consumers in Driver’s Seat as Retail Sales Climb

(Bloomberg) --

Several economic reports Thursday showed Americans are increasingly upbeat, more are catching the home-buying bug and perhaps most importantly, they’re still spending.

Retail sales excluding autos climbed in December by the most in five months, Bloomberg’s weekly index of consumer comfort advanced to the highest in 19 years and a gauge of homebuilder sentiment posted its best back-to-back reading since 1999. Other reports showed applications for unemployment benefits dropped to a six-week low, while a regional manufacturing index was the strongest since May.

Treasury yields rose and the dollar pared losses after the solid retail sales report.

“The consumer’s got everything going for them -- the job market’s tight, they’re getting modest wage gains, interest rates are low, household balance sheets are in good shape,” Ryan Sweet, head of monetary policy research at Moody’s Analytics, said by phone. “The consumer has plenty of firepower to keep spending. That’s good for the economy.”

Closely watched retail “control group” sales increased 0.5%, just above the median forecast in a Bloomberg survey of economists. The core measure excludes food services, car dealers, building-materials stores and gasoline stations, giving a better sense of underlying consumer demand.

For all of 2019, the value of retail sales increased 3.6%, a step down from an almost 5% gain in 2018 that was the largest annual advance in six years and reflected a boost from tax cuts. At the same time, consumers will probably remain the economy’s chief source of fuel as companies continue to hire and household sentiment stays elevated.

In a sign that Americans are warming to the purchase of a home, a report on builder sentiment from the National Association of Home Builders showed December and January were the best months since 1999. The NAHB’s measure of potential buyer foot traffic advanced this month to 58, matching the strongest reading since the end of 1998.

Jobs and Stocks

A resilient job market, depicted by the latest jobless claims figures which showed a fifth week of declines in applications for unemployment benefits, and higher stock prices are buoying consumers’ spirits. The Bloomberg index of comfort also showed a measure of views about the economy were the brightest since early 2001. There was also increased confidence in household finances and more viewed the buying climate as better.

What’s more, manufacturing may be showing signs of stabilizing. The Philadelphia Federal Reserve index of manufacturing activity climbed to the highest since May, while a gauge of new orders was the best in three months.

The retail sales figures came a day after Target Corp. joined other retailers in reporting weaker holiday sales. The retailer said comparable sales rose just 1.4% from a year earlier in the November-December period, well below 2018’s 5.7% growth. Same-store sales at Kohl’s Corp., J.C. Penney Co. and L Brands Inc. also fell during the period.

While the government reported December receipts at general merchandise stores rose 0.6%, the most since July, the department-store subcategory registered a 0.8% slump. That was the fifth-straight decline and evidence of the change in Americans’ shopping habits. For all of last year, department-store sales declined 5.5%, while receipts at nonstore retailers that include online purchases jumped 13.1%.

Broad Advance

The retail sales report showed 12 of 13 major categories increased. At apparel stores, purchases increased the most since March and sales at building-materials outlets posted the best advance since August.

Filling-station receipts increased 2.8%, the biggest gain since March, the report showed. Excluding automobiles and gasoline, retail sales climbed 0.5% after a 0.2% decline the previous month.

The sales data don’t capture all household purchases and tend to be volatile as they’re not adjusted for changes in prices. The government’s first estimate of fourth-quarter growth will offer a fuller picture of U.S. consumption in data due Jan. 30.

--With assistance from Chris Middleton.

To contact the reporter on this story: Vince Golle in Washington at vgolle@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Matthew Boesler

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