Resilient U.S. shoppers offer holiday hope to retailers

Payrolls Improve

Payrolls have climbed by an average 186,300 workers a month this year compared with 172,700 at the same point last year, Labor Department data shows. Gasoline prices are near their lowest levels since February 2011, stocks are at all-time highs and home prices are climbing by the most since 2006.

A report today showed the number of applications for unemployment benefits declined last week to the lowest level in almost two months, a sign of further healing in the labor market. Jobless claims in the week ended Nov. 16 dropped by 21,000 to 323,000, the fewest since the week ended Sept. 28, according to data from the Labor Department.

Strength in purchases of bigger-ticket items last month, including furniture and automobiles, was an encouraging sign as rising stock and home prices help some Americans feel wealthier, said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.

“The biggest positive at this point is the fact that asset prices have risen dramatically this year,” Stanley said.

Shares Climb

The Standard & Poor’s 500 Index is up 24.9 percent this year through yesterday, poised for the best annual gain since 2003. The gauge, which closed at a record on Nov. 15, dropped yesterday after minutes from the Federal Reserve’s meeting last month signaled the central bank may reduce bond purchases in coming months as the economy improves.

The rebound in housing is also boosting consumers. Home prices rose 12.8 percent in the year ended August, the most since February 2006, according to the S&P/Case-Shiller index of property prices. Consumers have also spent the recovery repairing their balance sheets, with household debt as a share of income falling to a decade low last quarter.

Cheaper gasoline may offer comfort to households, particularly those in the lower-income brackets. The average cost of a gallon of regular gasoline reached $3.18 on Nov. 11, the lowest level since February 2011, according data from AAA, the biggest U.S. auto club. That compares with an average $3.79 in mid-February.

Fuel Savings

The lower prices will save consumers as much as $31 billion compared with last quarter, according to economists at Deutsche Bank Securities Inc. in New York, led by Joseph LaVorgna. Each one cent drop in gasoline prices is worth roughly $1 billion in savings on energy spending that could be spent on other items, he estimated in a note to clients yesterday.

Even with improved consumer fundamentals, retailers aren’t taking any chances. Richfield, Minnesota-based Best Buy, the world’s largest consumer-electronics retailer, said this week it will keep pace with competitors’ discounts in the holiday season, hurting fourth-quarter profitability.

Cincinnati-based Macy’s is rolling out “very compelling marketing” in the fourth quarter and expects a “heightened sense of urgency among customers,” making promotions even more important, Chief Financial Officer Karen Hoguet said in a Nov. 14 conference earnings call.

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