Except for car buying, the consumer didn't show signs of holding back in November even with a big pickup in energy prices that is beginning to hit at the wholesale level.
That is what today's data shows with a 1.2 percent pickup in retail sales for November, double expectations, and a big 3.2 percent in jump in producer prices, the biggest increase in that number since 1973. If food and energy are removed from the mix, the producer price index would have risen just 0.4 percent.
That retail sales number could bode well for the holiday shopping season, but longer term the impact from energy is unclear. Scotsman Capital Managing Director Vince Farrell says the stronger spending by consumers is not surprising when you take a look at household wealth. Recent government data for the third quarter shows U.S. consumers had a total net worth of $58.6 trillion. Financial net worth, without home values, totaled a record $31 trillion.
"It would make sense the retail sales are up so much," said Farrell, a CNBC contributor. Holiday sales? "I think it's probably going to be better than expected. We came into it with low expectations," said Farrell. Some experts had bet the early Thanksgiving and big markdowns in November would rob sales from December. For the season, analysts largely expect low single digit gains.
Toys R Us CEO Gerald Storch says he expects to a big surge in holiday spending yet to come.
"We're about half way through. It started very strong. Sales have been erratic in the past week or two but we're expecting a big pickup in the last two weeks before Christmas," he told Erin Burnett on "Squawk on the Street."
"There's a very long time between Thanksgiving and Christmas. It's what we retailers call a late Christmas," and that affects buying trends, he said. Retail sales for November would have been up 1.8 percent if autos were excluded. Miller Tabak's Tony Crescenzi says in a note that those consumer retail sales were boosted by inflationary factors.
"For example, excluding gasoline sales, which increased 6.8 percent, retail sales minus automobile sales were up 1.1 percent," he wrote. "Taking this further, subtracting food and beverage sales from this figure results in a gain of 0.9%. In other words, if not for the impact that inflation had on food and gas, core retail sales would have been reported to have gained half as much as was reported."
CNBC's Rick Santelli says he expects to see signs of that big increase in gasoline spending in consumer prices data tomorrow. Traders will be watching to see if the year-over-year consumer price index runs once again above four percent.
"I can't tell you how many people are looking at 1973 and 1974 charts...whether they trade grains, energy or credit markets. They are looking for parallels of the same mentality and framework of that period when we saw stagflation," Santelli said.
"Stagflation is evident when there's moderate growth and rising inflationary pressures, like now. Both of these trends would handcuff the Fed's ability to tweak target rates," said Santelli. "I don't know that we're going to turn into the 1970s but these guys who trade and put their money to work are as good a group to monitor as anybody."
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