Heading into home stretch, retailers ring up strong holiday numbers

Rising consumer confidence, job growth and even falling gas prices are invigorating consumers as holiday shopping hits the home stretch.

Retail sales grew in November almost twice as fast as analysts expected, erasing doubts created by early reports of a weak Black Friday for merchants. Online sales have been particularly strong.

"The U.S. consumer is in a better place financially and emotionally than we have seen in a long time," said Scott Anderson, chief economist for Bank of the West in San Francisco.

Economists watch people's shopping habits in November and December because those two months are the busiest of the year for stores, and consumer spending accounts for a large portion of the country's economic output.

Kim Schminkey, of Wyoming, Minn., said she's buying more gifts than a few years ago because her kids are in grade school, but she said it also feels like the economy is improving.

She visited Macy's in downtown Minneapolis with her mother and two children on Friday afternoon to see the eighth-floor holiday display.

"I think it's getting better," she said. "Friends have more money for leisure spending."

The economy added 321,000 jobs in November and is on track for its best year of job growth since 1999. Average earnings rose slightly in November. Falling oil prices are putting a little more cash in people's pockets by cutting gas prices.

Anderson's models show the plunge in oil prices could boost consumer spending and U.S. economic growth by about half a percentage point.

Small-business confidence rose in November and consumer confidence reached its highest level since 2007, according to a Thomson Reuters/University of Michigan survey.

"The U.S. consumer seems to have the wind at their back," Anderson said.

Eric Hill, an apprentice electrician working on the new Vikings stadium, said he's not ready to go gangbusters on holiday spending this year. But he expects to get a more than $3 raise next November and he's optimistic that he'll buy a lot of gifts in 2015.

Still, holiday sales growth hasn't recovered to prerecession levels.

To some extent, it was debt that fueled the massive increases in holiday sales from the mid-2000s, as people used income from the future to pay for purchases right away.

But people aren't doing that as much anymore. October's growth in revolving credit — mostly credit card loans — was flat.

"All indication is that things are getting better," said Eugenio Alemán, an economist at Wells Fargo in Charlotte, N.C. "But we haven't seen the ingredients that have produced better holiday seasons in the past, which is mostly the usage of credit cards."

Retail sales for the last two months of the year regularly grew by 6 percent in the 1990s and mid-2000s. The National Retail Federation puts its forecast for 2014 at 4.1 percent growth. Wells Fargo projects 3.98 percent growth.

Bonnie Walmsley, who has a grown son and daughter, said eight years ago she went to Saks and bought a suitcase full of clothes for her daughter. She would never do that today.

"She didn't even want any of it," she said.

Walmsley, a server at the Minneapolis Club, said if you have young children, then sure, you'll need to spend a lot of money in November and December.

But it seems like she and her friends don't need anything, and she's cut back on gift-giving. She had two pounds of Dunn Bros. coffee for her son in her purse, and she said she would buy him a gift card at Costco.