Retail sales rise in October
WASHINGTON (AP) – Consumers lost a little of their enthusiasm for auto purchases last month but spent like mad in a number of other areas including clothing and gasoline, the Commerce Department reported Friday. Overall, retail sales were up 0.2 percent in October after having risen by 1.6 percent in September, which had been the biggest gain in six months.
The slowdown last month reflected a big 2.2 percent decline in auto sales. Without this big decline, retail sales would have risen by 0.9 percent last month, the best showing since last May, as various sectors outside of autos made significant gains.
Sales at clothing stores shot up 3 percent as cooler weather lured shoppers into buying winter clothes. General department stores saw a solid gain as well of 0.9 percent. Both increases gave encouragement that consumers will keep cash registers ringing during the all-important Christmas sales season.
“In October, people bought just about everything,” said Joel Naroff, chief economist at Naroff Economic Advisors. “Demand for clothing, furniture, general merchandise, food, restaurants and health products was solid.”
Analysts, who had been worried that consumer confidence could falter because of the sharp runup in energy prices, took heart from the widespread strength in retail sales outside of autos although they noted that the big 4.3 percent jump in sales at gasoline service stations reflected higher pump prices rather than people driving more.
Economists were also encouraged by a second report showing that the preliminary reading of consumer confidence in early November rose to 95.5, up from 91.7 in October, a rebound that analysts said probably reflected in part relief that the uncertainty caused by the presidential election was now over.
In a third report, the Commerce Department said that inventories held by businesses on shelves and backlots edged up a slight 0.1 percent in September after having risen by a much larger 0.7 percent in August.
The slowdown in inventory building reflected a big 0.4 percent drop in inventories held by retailers who fell behind in restocking their shelves in the face of strong sales demand during the month.
Consumer spending, which accounts for two-thirds of the total economy, is being closely watched as Christmas shopping begins. The big jump in oil prices earlier this year jolted consumers and slowed the overall economy dramatically.
However, in recent months, growth has rebounded and analysts are forecasting that the economy should finish the year on a strong note. That view was bolstered last week with a report that businesses created 337,000 new jobs in October, the best showing since March and double what had been forecast.
Retail sales have been on a rollercoaster for most of this year with a strong month often followed by a plunge in demand, reflecting the fortunes of auto dealers, who have been forced to return to attractive sales incentives to lure shoppers back into their showrooms.
The 2.2 percent drop in car sales last month had followed a large 4.3 percent gain in September, which had come after the incentives were restored.
In addition to the big drop in auto sales, other areas of weakness last month were sales at building supply and garden stores, which fell by 1.1 percent, and sales at electronics and appliance stores, which edged down a slight 0.1 percent.
Analysts were at a loss to explain the building supply decline given that other reports show building activity on the rise in Florida and other states battered by September hurricanes.
The Federal Reserve on Wednesday boosted a key interest rate for a fourth time this year with Fed officials reporting improvements in economic growth and job hiring despite the big jump in energy costs.
Last week, the nation’s retail stores reported that the outlook for the all-important holiday shopping season had brightened somewhat as many national retailers reported sales gains.
Many mall-based apparel stores such as Limited Brands and Talbots saw a rebound in spending, helped by cooler weather. However, Wal-Mart and other discount merchants reported they had another month of lackluster sales.
AP-ES-11-12-04 1206EST