Retail sales up; CEOs in hiring mood
Wednesday, December 15, 2010
WASHINGTON (AP) — A strong start to the holiday season is raising confidence that the consumer is back and that 2011 could be a better year for the economy than expected.
Retail sales are rising, boosted by the best month for department stores in two years. Inflation remains tame. Businesses are restocking their shelves in anticipation of more consumer demand. And a survey of CEOs at America’s biggest companies suggests hiring will pick up in the next six months.
The latest government data, combined with an emerging package of tax cuts and long-term unemployment benefits, are prompting economists to ramp up their forecasts for growth in the months ahead.
“We could be on the verge of a period of economic activity that will surprise everybody by how strong it is,” said Jonathan Basile, a vice president for economics at Credit Suisse Securities. “That tends to happen in recoveries when everything starts to ignite at the same time.”
At the same time, the economy will need more hiring and higher pay to sustain the latest spending gains.
The Federal Reserve singled out high unemployment on Tuesday while saying it planned to maintain the pace of its $600 billion Treasury bond-buying program. The bond purchases are intended to lower long-term interest rates, lift stock prices and encourage higher spending.
But after the Fed issued its statement, Treasury prices sank, pushing their yields to their highest level since May. The yield on the 10-year note helps set interest rates on many kinds of loans including mortgages.
Bond yields have been rising over the past two months as investors have raised their expectations for growth and inflation. Higher interest rates could threaten the gains the economy has made.
Retail sales jumped 0.8 percent in November, the Commerce Department said Tuesday. It was the fifth straight monthly gain. Department stores led the way with a 2.8 percent gain, the biggest for this category since a 3 percent increase in November 2008.
Retailers have been particularly aggressive in their holiday sales promotions this year, putting many consumers in the mood to spend despite high unemployment and weak job gains. The holiday shopping season accounts for as much as 40 percent of annual revenue and profits for retailers.
“It seems there were Black Friday sales, pre-Black Friday sales and post-Black Friday sales,” said Joel Naroff, chief economist at Naroff Economic Advisers.
One important statistic that remains bleak is the unemployment rate, which rose to 9.8 percent last month. Many economists caution that the economy won’t take a leap forward without more hiring and higher pay.
That may not be too far away, according to a new survey of executives of America’s largest companies. It found that 45 percent plan to hire within six months — the highest percentage for that group in eight years.
The Business Roundtable survey was released a day before President Barack Obama is to meet with a group of corporate executives to discuss job creation and making the U.S. more competitive.