Economy Watch: Retail Sales Edge Upward in November

For all the talk of Thanksgiving sales, November retail sales only increased 0.2 percent from October. The FOMC is continuing the almost-forgotten twist and, in response, investors were underwhelmed as markets took a modest slide.

December 14, 2011
Dees Stribling, Contributing Editor

Image courtesy Flickr user The Consumerist

For all the talk about a retail upsurge around Black Friday and Cyber Monday and the jolly mood among retailers this holiday season, the U.S. Census Bureau reported on Tuesday that retail sales in November only inched up by 0.2 percent compared with October, which was less than expected, considering the hype. It was the slowest month-over-month increase since the summer, but at least in November 2011 retail sales were up 6.7 percent compared with the same month last year, so retailers can take some solace in that.

Americans were still out buying cars, clothes, appliances and electronics at a higher volume, but sales at grocery stores and restaurants edged down. Even when car sales are factored out of total sales, as economists are sometimes wont to do, sales were still up 0.2 percent for the month.

Surprisingly, in a separate report on Tuesday, king-of-the-hill electronics chain Best Buy reported that its net income fell 29 percent to $154 million, or 42 cents a share, in the quarter ended Nov. 26, from $217 million, or 54 cents a share, a year earlier. This came despite opening at midnight on Black Friday. It seems that recent and significant discounting on the likes of mobile devices, enormous yet flat TVs, and DVDs cut into the retail giant’s income for the quarter. Its stock sank about 15 percent for the day.

FOMC Pursues a Course of Inaction

The Federal Reserve Open Market Committee ended its latest meeting anticlimactically on Tuesday, announcing that it will continue the twist (anyone remember the twist?) and, more fundamentally, that it will keep the target range for the federal funds rate at 0 percent to 0.25 percent.

In short, no changes at all, and no hints (not even very small ones) of more stimulus to come. To be fair, the FOMC spelled all this out fairly clearly for a central bank. “[The committee] currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013,” the FOMC noted in its statement.

The Fed cited the same-old-same-old as its reasoning behind doing nothing new. “Indicators point to some improvement in overall labor market conditions,” but not that much improvement. “Household spending has continued to advance,” but not that much. “Business fixed investment appears to be increasing less rapidly and the housing sector remains depressed,” the statement added. But at least inflation seems to have “moderated since earlier in the year, and longer-term inflation expectations have remained stable.”

Investors Not Amused by Fed

Wall Street apparently didn’t think much of the Fed’s inactivity, since immediately after the central bank spoke on Wednesday, the equities markets took a downward slide. A modest slide, but a slide nevertheless: the Dow Jones Industrial Average lost 66.45 points for the day, or 0.55 percent, while the S&P 500 was down 0.87 percent and the Nasdaq declined 1.26 percent.

The real entertainment on Wall Street these days is the MF Global affair, and its star, former New Jersey Gov. Jon Corzine. On Tuesday, testifying before Congress about the collapse of the company, its fondness for dodgy European debt, and that missing $1.2 billion, Corzine continued with the Sgt. Schultz defense, long beloved by former Masters of the Universe who now feel obliged to say they “knew nothing, nothing,” about the goings-on at their own companies.