U.S. Consumers Hit the Mall

According to the Department of Commerce, U.S. retail sales grew 0.5 percent in October, and the Producer Price Index actually dropped 0.3 percent at the same time. Bond yields rose once again for Spain and Italy.

November 16, 2011
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Brett Jordan

Economists might be wringing their hands about the U.S. economy these days, but Americans shoppers seem a little more confident than dismal scientists about the shape of things. Or at least, Americans are just confident enough to want to buy things. Worrisome reports from distant countries aren’t going to keep them out of stores.

According to the U.S. Department of Commerce on Tuesday, U.S. retail sales grew 0.5 percent in October compared to September. Moreover, this time around the monthly sales growth was more than just a function of Americans visiting showrooms and leaving with new (or pre-owned) cars. Even without auto sales — which were very good, in fact the best month for the auto industry in four years — retail sales still rose by 0.6 percent.

The hope now, especially for retailers, is that consumers will keep up that momentum through the rest of the year — particularly in December, the critical month for a lot of retailers. The National Retail Federation is predicting a relatively modest increase of 2.8 percent year-over-year in retailer revenue for November and December, which would be smaller than 2010’s 5.2 percent increase. Still, that would be a respectable showing for the nation’s retailers, whose average annual gains for those two months during the last 10 years is lower than 2.8 percent.

PPI Drops in October

The Producer Price Index for finished goods declined 0.3 percent in October, the U.S. Bureau of Labor Statistics reported on Tuesday. That’s in contrast to the 0.8 percent rise in the price of finished goods in September. Finished goods are still more expensive on the wholesale level than a year ago, however, with index increasing 5.9 percent for the 12 months ended October 2011. Still, that’s the smallest year-over-year advance since March 2011.

Once again, the volatility of energy prices drove the PPI, in this case downward. Prices for finished energy goods moved down 1.4 percent in October, the largest decrease since a 2.3 percent drop in June 2011. In fact, nearly two-thirds of the October PPI decline can be chalked up to the ever-fickle gasoline index, which fell 2.4 percent. Lower prices for residential natural gas and home heating oil also were factors in the drop.

At earlier stages of processing, the index for intermediate goods moved down 1.1 percent in October and crude goods prices fell 2.5 percent. Falling prices for these classes of goods likewise were driven in large part by falling energy prices. For now.

Italian, Spanish Debt More Pricey

Investors were again atwitter about Europe on Tuesday, with yields on 10-year Italian bonds rising above 7 percent again — a rate considered unsustainably high. But that wasn’t all. Spanish debt–remember Spain, with a housing crash that makes the U.S. crash look mild by comparison? — saw yields above 6 percent, the highest since this summer. Even French debt has ticked up lately. These are the kinds of trends that have investors reaching for the Xanax.

Wall Street bounced around on Tuesday, ultimately defying expectations by going up. The Dow Jones Industrial Average gained 17.18 points, or 0.14 percent, while the S&P 500 advanced 0.48 percent and the Nasdaq was up 1.09 percent.