WASHINGTON - A strong start to the holiday season is raising confidence that the consumer is back and that 2011 could be a better year for the economy than expected.
Retail sales are rising, boosted by the best month for department stores in two years. Inflation remains tame. Businesses are restocking their shelves in anticipation of more consumer demand. And a new survey of CEOs at America's biggest companies suggests hiring will pick up in the next six months.
Tuesday's data, combined with an emerging package of tax cuts and long-term unemployment benefits, are prompting economists to ramp up their forecasts for growth in the months ahead.
"We could be on the verge of a period of economic activity that will surprise everybody by how strong it is," said Jonathan Basile, a vice president for economics at Credit Suisse Securities. "That tends to happen in recoveries when everything starts to ignite at the same time."
But, the economy will need more hiring and higher pay to sustain the latest spending gains.
In one report Tuesday, the Commerce Department said retail sales jumped 0.8 percent in November compared with October, the fifth straight monthly gain. Department stores led the way with a 2.8 percent gain, the biggest for this category since a 3 percent increase in November 2008.
Retailers have been particularly aggressive in their holiday sales promotions this year, putting many consumers in the mood to spend despite high unemployment and weak job gains.
"It seems there were Black Friday sales, pre-Black Friday sales and post-Black Friday sales," said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pa.
Many retailers got a boost not only from holiday sales, but also from the weather. A cold November, following two months of unseasonably warm weather, helped boost sales of coats and other winter gear in much of the country.
November's better-than-expected sales figures are prompting many economists to revise their forecasts for consumer spending growth in the October-December quarter. Basile has upgraded his forecast by a full percentage point - to a 3.2 percent increase from 2.2 percent - because of the retail data and last week's report that the trade deficit narrowed in October.
One key statistic that remains bleak is the unemployment rate, which rose to 9.8 percent last month. Many economists caution that the economy won't take a leap forward without more hiring and higher pay.
That may not be too far away, according to a Business Roundtable survey of executives of America's largest companies. The survey, released Tuesday, found that 45 percent plan to hire within six months - the highest percentage for that group in eight years.