NEW YORK ( TheStreet) -- The U.S. consumer is back.
At least that's what the numbers are saying.
As reported by the U.S. Department of Commerce last week, retail sales rose 0.7% in November, after rising 0.5% in October, beating Wall Street's expectations of a 0.4% gain heading into the busy holiday shopping season. Core sales for the month rose 4.4% versus the year-ago period, and the National Retail Federation said the numbers support its expectation of a 4.1% jump in holiday sales this year.
Some of this spending growth can be attributed to lower fuel prices -- oil was selling for about $59 per barrel as of Tuesday, contributing to some of the lowest prices seen at the pump since 2009, but there are longer-term trends at work as well.
For example, the employment market is strengthening. The Bureau of Labor Statistics reported that the U.S. economy added 312,000 jobs in November and unemployment is holding steady at 5.8 %, the lowest level for that figure since July 2008. What's more, inflation has generally held flat, making many middle-class Americans feel richer and more likely to spend.
In short: Things are looking good for the U.S. consumer.
Dubravko Lakos-Bujas, JPMorgan's head of U.S. equity and quantitative strategy, addressed these trends in a research note last week, calling the U.S. economy of late a "supportive consumer spending environment with markedly high disposable income, increasing wealth effect, and rising household leverage."
Further, he wrote, given the low rate of consumption over the last several years, pent up demand could drive consumer activity above average levels in the near term as Americans hit the stores to replenish worn out products in the coming months.
"We believe the immediate industries likely to benefit are goods and services that have smaller ticket prices, such as Retail and Restaurants, and mid-ticket prices, like Airlines and Hotels, especially with oil prices down," Lakos-Bujas wrote in the report. "Then household items that require access to revolving credit and greater use of equity lines (Autos and Home Furnishings) should improve most with increasing household leverage, in our view."
Playing the American Shopper
What does this all mean for stocks? It's likely to be good news across the board for the consumer discretionary sector, says Efraim Levy, S&P Capital IQ equity analyst, as lower fuel costs begin to free up money that Americans can use to either pay down debt or go shopping.
"People are getting reverse sticker shock when they fill up the tank," he says. "Especially now during the holiday season; 'Hey, I have a few hundred more to spend on my family.' Those savings are going right into people's pockets."
Here are the sectors where analysts see the most potential for profits from resurgent consumer spending.
Retail: Lower gas prices will primarily benefit middle-class consumers, says Chris Dorsey, an investment analyst with HFI Wealth Management in McLean, Va., and that should flow to value-oriented retailers like TJX (TJX - Get Report) and Ross Stores (ROST - Get Report) , as well as general merchandise stores like Target (TGT - Get Report) and Family Dollar (FDO) . Consumer technology companies could benefit as well, he says, including Apple (AAPL - Get Report) and the makers of gaming consoles and online gaming systems, as shoppers turn their renewed purchasing power to iPhones and other gadgets.
Travel: There is now extra money available for vacations, says Levy, which is boosting both the airlines as well as regional auto travel. That means more vehicle wear and tear, which should benefit retailers like AutoZone (AZO) and Pep Boys (PBY) . Even the automakers themselves might benefit from lower prices at the pump, he says. "It should help with the shift from small cars to crossover utility vehicles and SUVs."
Restaurants and Food: The dining category in general is a potential beneficiary of more consumers with cash in their pockets, Levy says. "I'd expect [restaurants] to expand more in line with what they already have. If you're selling upscale, you'll get more upscale customers; if you're at the low end you might have more foot traffic or more upgrades." A range of restaurants could benefit, including everything from McDonald's (MCD) to Darden (DRI) . Grocers would likely see less of an impact, although at the lower end of the economic spectrum you might see some consumers upgrading their purchases, maybe looking at organic products or just better quality now that they can afford it.
"We think this is not just a holiday season phenomenon," says Dorsey. "We're bullish on the U.S. in general. Especially consumer discretionary, and we've been there for several years now. There have been improvements in the U.S. not just this year but for several years."
Hoxton agrees: "Energy prices are just now starting to be recognized by consumers," he says. "It's like getting a pay raise. We're going to benefit in the holiday season, certainly, but these energy prices don't look like they're bottoming yet. We could see gas below $2 in several states."