Retail sales rise for a second consecutive month. Sales at retail and food establishments rose 1.3 percent from October to November, for the second consecutive month.  Unlike the previous month where retail sales mostly reflected a rise in motor vehicles and parts, November’s increase was due to a broader increase in spending; however, sales at gasoline stations comprise almost half of November’s increase.  According to the Energy Information Administration, the average retail price for all grades of gasoline rose in November to $2.71 per gallon, a 4 percent increase from the previous month.  Excluding motor vehicles, parts, and gasoline, retail and food establishment sales rose 0.6 percent in November, the highest monthly increase since February 2009.  (See Chart) Compared to last November, retail and food service sales rose 1.9 percent, the first time in 14 months that sales were higher on a year-over-year basis.  Because the Census Bureau adjusts its retail sales and food services data for seasonal variation, the reported increase already accounts for the rise in spending associated with holiday shopping. This increase is consistent with retailers’ perceptions that 2009 Black Friday’s sales were only slightly better than last year’s sales.  Consumers appear to be changing their typical holiday shopping strategy – sales at electronics and appliance stores and department stores declined by 3.4 and 4.7 percent, respectively, relative to last year, while sales at non-store retailers, which include Internet retailers, increased by 8.1 percent from last November.  

Trade deficit narrows. The Bureau of Economic Analysis announced that the trade deficit narrowed by $2.8 billion in October to $32.9 billion. Exports rose by $3.5 billion while imports increased by $0.7 billion, mostly due to declines in the export and import of goods rather than services. The $3.2 billion increase in goods exports primarily reflects a rise in both the exports of capital goods ($1.2 billion) and consumer goods ($1.0 billion). While imports of capital goods ($1.1 billion) and consumer goods ($1.0 billion) also rose, the decline in imports was due to a $1.8 billion decline in imports of industrial supplies and materials. This decline was mostly driven by a decline in both the volume and price per barrel of crude oil imports. The decline in the trade deficit is broadly consistent with the 6 percent decline in the value of the dollar relative to its major trading partners. A general depreciation in the dollar inhibits domestic purchases of foreign products, but also improves the performance of the economy by making domestic products and services more attractive to foreign buyers.  A rise in exports could signal an increase in employment as demand for U.S. produced goods grows abroad.

Household net worth stabilizes as homeowners’ equity rises. Household net worth fell by only 6 percent on a year-over-year basis in the third quarter of 2009, compared to double digit declines over the previous 4 quarters. This increase in net worth is due to increases in households’ real estate assets. Homeowners’ equity as a percentage of household real estate increased to 37.6 percent, higher than the low of 33.5 percent in the first quarter of this year but still much lower than 60.9% experienced before the housing bubble in 2001. Owner’s equity as a percent of household real estate was stable until the recent housing bubble burst, hovering between 58 and 62 percent from 1991 until 2005.