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 survey of CEOs at America's biggest companies suggests hiring will pick up in the next six months.
High unemployment remains a concern. The Federal Reserve singled out the nation's 9.8 percent jobless rate Tuesday when it said it plans to maintain the pace of its $600 billion Treasury bond-buying program.
But the latest government 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."
Retail sales jumped 0.8 percent in November, the Commerce Department said Tuesday. It was 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. The holiday shopping season accounts for as much as 40 percent of annual revenue and profits for retailers.
"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.
Best Buy Co., which decided against discounting as deeply as retailers such as Wal-Mart Stores Inc., ended up paying for it. The largest U.S. electronics chain said its quarterly net income, covering a three-month period ending Nov. 27, fell more than expected as that it lost sales of TVs and laptops to competitors.
The Minneapolis-based chain also reduced its full-year outlook. Best Buy's shares fell nearly 16 percent in mid-afternoon trading.
Other retailers got a boost not only from holiday sales but from the weather. A cold November helped boost sales of coats.
and other winter gear in much of the country.
Consumer spending is closely watched because it accounts for 70 percent of total economic activity. A drop in retail sales in May and June had raised fears that the economy could be in danger of slipping back into recession.
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 3.2 percent from 2.2 percent, because of the retail data and last week's report that the trade deficit narrowed in October.
The signs of growth were not enough to persuade the Fed to pull back on its bond purchases, which are intended to lower long-term interest rates, lift stock prices and encourage higher spending.
Investors had wanted the Fed to increase its bond-buying to stop interest rates from rising as result of anticipated federal tax cuts. After the Fed announced that it would maintain the pace of its purchases, Treasury prices sank, pushing their yields to their highest level since May.
The yield on the 10-year note helps set interest rates on many kinds of loans, including mortgages. Bond yields have been rising over the past two months as investors have raised their expectations for growth and inflation. Higher interest rates could threaten the gains the economy has made.
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 new survey of executives of America's largest companies.
The Business Roundtable survey found that 45 percent plan to hire within six months - the highest percentage for that group in eight years. The survey was released a day before President Barack Obama is to meet with a group of corporate executives to discuss job creation and making the U.S. more competitive.
It also comes as Congress is on the verge of passing legislation that would extend the George W. Bush-era tax cuts for two years, lower payroll taxes for workers and extend unemployment benefits through the end of 2011. The one-year cut in Social Security taxes could mean an extra $2,000 in 2011 to someone earning $100,000.
Mark Zandi, chief economist at Moody's Analytics, said the tax cut plan has the potential to lift economic growth to 3.9 percent, instead of the 2.8 percent that is in his current forecast.
He also said stronger growth would double the number of jobs the economy creates next year. His current estimate is 1.3 million jobs, which would leave unemployment unchanged at 9.8 percent. But with growth from the tax cut plan, he anticipates 2.7 million new jobs, which would push the unemployment rate down to 8.7 percent.
Among other economic reports:
? Wholesale prices rose 0.8 percent in November, mostly due to a jump in energy prices. Core inflation, which excludes volatile energy and food prices, ticked up only 0.3 percent. A report on consumer prices is scheduled to be released Wednesday.
? Businesses are continuing to replenish their stockpiles - a trend that helped lift the country out of the recession. Inventories rose 0.7 percent in October. It was the 10th straight monthly gain. And sales by manufacturers, wholesalers and retailers rose 1.4 percent in October, the best showing in seven months. Stronger rebuilding of stockpiles and sales suggest factories will see rising orders in coming months.