The US growth outlook got a boost earlier this week with the release of stronger-than-expected retail sales data that helped cement views the Federal Reserve will raise interest rates again.
The Commerce Department said retail sales rose 0.1 per cent in November, compared with a Wall Street forecast for a 0.1 per cent decline. In addition, October was revised up sharply, to plus 0.8 per cent versus the more modest 0.2 per cent gain initially reported.
October business inventories data from the Commerce Department reinforced the impression of consumer spending gathering momentum in the fourth quarter, with retail stocks advancing less than expected as sales grew.
"November retail sales details were quite solid and the upward revision for October really puts the momentum on a strong footing for the fourth quarter," said Kathleen Stephansen, director of global economics at CSFB.
"This only encourages the Fed further to raise rates by 25 basis points tomorrow," she said.
Economists scrutinise retail sales as a dominant component in consumer spending, which in turn makes up two-thirds of US economic output. The numbers support other signs of a moderate ongoing expansion as oil prices eased from a peak above $55 a barrel in October.
Stripping out autos, retail sales were up 0.5 per cent, compared with forecasts of a 0.3 per cent advance and an upwardly revised 1.1 per cent increase in October, signaling a solid start to the holiday shopping season. On a 12-month basis, retail sales excluding autos have grown 8.6 per cent.
"It's a pleasant sign of better-than-expected strength in a period when energy prices were quite high," said Patrick Fearon, an economist at A.G. Edwards & Sons.
Motor vehicles and parts sales shrank 1.3 per cent. But this performance had been anticipated following industry reports of a weak month amid signs that consumers were holding back in the hope of better bargains in December.
The Commerce Department said business inventories grew a smaller-than-expected 0.2 per cent in October, with retailers emptying stocks at a rapid pace while their sales grew.
Analysts polled by Reuters had forecast a 0.6 per cent rise in inventories versus September, which was revised to show no change after an initially reported 0.1 per cent increase.
Growth in sales by manufacturers, retailers and wholesalers was stronger in October, advancing 1.2 per cent after a 0.3 per cent gain the previous month.
Economists see rising inventories either as a sign of confidence in future demand or as a result of an unexpected decline in sales.
Analysts look at the inventories-to-sales ratio to determine how to interpret the data.
This measure of the number of months it would take to deplete stocks at the current rate of sales declined to 1.30 months' worth, revisiting the all-time low in May, compared with a revised 1.31 months' worth in September.