WASHINGTON, DC - A gauge of U.S. consumer spending rose solidly in November as the holiday shopping season got off to a fairly brisk start, suggesting enough momentum in the economy for the Federal Reserve to raise interest rates next week for the first time in nearly a decade.
The Commerce Department said on Friday retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 percent after an unrevised 0.2 percent gain in October.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Economists polled by Reuters had forecast core retail sales increasing 0.4 percent.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, surprisingly slowed in September and October. The moderation came despite a tightening labor market, which has started to lift household income.
The latest signs of strength in consumption support expectations that the Fed will raise its benchmark overnight interest rate from near zero when policymakers conclude a two-day meeting next Wednesday. The U.S. central bank has not raised rates since June 2006.
Overall retail sales increased only 0.2 percent in November as automobile sales fell and cheaper gasoline weighed on receipts at service stations.
Retail sales edged up 0.1 percent in October. Auto sales slipped 0.4 percent in November, the largest decline since June, after falling 0.3 percent in October. Though automakers reported strong sales last month, the units sold were slightly below October sales.
Receipts at service stations fell 0.8 percent after declining 1.0 percent in October.
Elsewhere, sales at clothing stores shot up 0.8 percent, the largest increase since May. Sales at online retailers rose 0.6 percent and receipts at sporting goods and hobby stores increased 0.8 percent. Sales at electronics and appliance outlets advanced 0.6 percent.
The increase last month in discretionary spending suggested a fairly busy start to the holiday shopping season. However, receipts at building materials and garden equipment stores slipped 0.3 percent as did sales at furniture stores.