Retail Sales Rise, Holiday Outlook Bleak

Despite a greater than expected rise in retail sales in October, many local South Florida residents are still hesitant to spend more this holiday season.

Sales rose more than expected in October to post their largest gain in seven months, further evidence the economy is regaining strength.

The overall report offered hope for the holiday but many people were quick to note they would spend the same, if not less, compared to last year.

According to CNBC, Total retail sales increased 1.2 percent, boosted by purchases of motor vehicles and building materials, after advancing by 0.7 percent in September. The rise last month was almost double market expectations for a 0.7 percent gain.

In a separate report, the New York Federal Reserve's "Empire State" general business conditions index fell to 11.1 in November from 15.7 in October. Economists had expected a tick down to 14 this month. Analysts were quick to note the survey was not a bellwether for the rest of the U.S economy.

Recently, the Federal Reserve debuted a controversial $600 billion round of bond buying, known as quantitative easing, to provide additional stimulus. This round of stimulus became known as QE2.

Michael Woolfolk, senior currency strategist at BNY Mellon in New York, states, "If the economy grows more quickly than expected, that could prompt the Fed to tilt toward a smaller QE package over the next year."

Although the unemployment rate is hovering around 9.6 percent, October's retail sales report showed gains across most categories.

Gasoline station receipts rose 0.8 percent after increasing 1.2 percent in September. Clothing and clothing accessories sales gained 0.7 percent, while receipts at sporting goods, hobby and book stores rose 1.0 percent, the largest increase since March.

Core retail sales, which exclude: autos, gasoline and building materials, rose 0.2 percent after a 0.4 percent increase in September. This report is a more accurate indicator of consumer spending, which accounts for 70 percent of U.S. economic activity.

One dark spot in the report shows purchases at electronics and appliance stores fell 0.7 percent in October. Furniture sales also fell 0.7 percent last month.

"It shows the likelihood is that the holiday period is going to be a good one for retail sales," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, N.Y.

Here in South Florida, pessimism is high. Local businessman, Kimber White of United American Mortgage is planning on spending the same, if not, less than last year. "I plan on being more frugal than last year," he states. "I will spend more wisely, even though I have the capability to spend more."

Another local resident, Gerri Vidal-Rosa agreed with White. "No way will I spend more this year. In fact I may go back to making gifts out of construction paper and glitter," she says jokingly.

With the increase in personal dept, Susan Caplan of Pompano Beach is also keeping a tight hold on her wallet.

"I am more broke than I was last year," states Caplan. "Everything seems to be piling up, medical bills, car repairs, etc. The raise I received this year is barely worth talking about."

Notwithstanding the local outlook, we will need to wait until after Black Friday figures are released to get a true gauge of how this year's holiday spending will compare to years past.