Energized shoppers boosted sales at the nation's retailers in November by the largest amount in three months, reinforcing the belief that consumer spending will keep the economy out of a new recession.
The Commerce Department report Thursday that retail sales in November were 0.4 percent higher than in October also raised hopes that the holiday shopping season will see people acting more like Santas than the Grinches some had feared.
Shoppers hit the stores with more enthusiasm in November than in the previous two months: Retail sales fell by 1.5 percent in September and edged up by just 0.1 percent in October.
``The urge to splurge started to creep back into consumers' spending patterns,'' said economist Joel Naroff of Naroff Economic Advisors. ``The fears that households would not visit the malls appear to be unfounded.''
Excluding automobile sales, which can swing widely from month to month, retail sales rose by 0.5 percent in November, a stronger performance than the 0.2 percent rise economists were forecasting.
Consumer spending accounts for two-thirds of all economic activity in the United States. It has been the main force keeping the economy going this year.
``Good retail sales are America's Christmas gift to itself,'' Commerce Secretary Don Evans said of November's retail figures.
Tracy Mullin, president of the National Retail Federation, also was encouraged by November's retail report and predicted holiday sales this year would be around 4 percent higher than last year.
Low interest rates, tax cuts and extra cash from refinancing of home mortgages have supported consumer spending, helping to offset potentially negative forces such as a stagnant labor market and a bumpy stock market.
``We believe this infusion of cash can keep spending going through this winter,'' said Merrill Lynch economist Gerald Cohen. ``But if consumer spending is going to continue to grow, the job picture needs to improve sooner rather than later.''
The Labor Department reported new claims for unemployment benefits shot up by a seasonally adjusted 83,000 to 441,000 last week, the highest level since the middle of April. Analysts said the increase was exaggerated by seasonal adjustment problems, but they still predicted a sluggish job market in the months ahead.
The Federal Reserve left interest rates unchanged Tuesday, after slashing rates by a bold half-point at its previous meeting on Nov. 6. That was the first rate cut this year.
``A relatively aggressive easing action could help to ensure that the current soft spot in the economy would prove to be temporary and enhance the odds of a robust rebound in economic activity next year,'' the Fed said in minutes of the November meeting released Thursday.
In another report, the deficit in the broadest measure of trade narrowed in the third quarter to $127 billion, from a $127.6 billion shortfall in the second quarter, the Commerce Department said.
The ``current account'' deficit measures not only the movement of goods and services between countries, but also investment flows and unilateral transfers, including U.S. foreign aid payments.
In the retail report, sales of furniture and home furnishings jumped by 2.3 percent in November, the biggest increase in nearly two years, following a 0.2 percent rise in October.
November's rise comes as the housing market — powered by low mortgage rates — is on track to post record sales this year.
Sales of building materials rose 1.2 percent in November, up from a tiny 0.1 percent advance in October.
At electronics and appliances stores, sales went up 0.9 percent, on top of a 1 percent increase in October. Food and beverage sales rose 0.9 percent in November, up from a 0.1 percent gain. Sales at health and beauty stores increased 0.3 percent, following a 0.2 percent advance.
Automobile sales dipped 0.1 percent in November, an improvement from October's 2.1 percent drop.
At bars and restaurants, sales rose 0.3 percent last month, a turnaround from the 0.5 percent decline in October.
Sales at general merchandise stores, including department stores, increased 0.3 percent in November, down from a 1.2 percent gain.
There were a few weak spots: Clothing sales dropped by 1.3 percent in November, following October's brisk 5.5 percent rise. Sales at sporting goods, hobby and book stores fell 0.5 percent, after a 0.1 percent decline.