Autos drive 1.4% rise in US retail sales
Posted: 17 November 2009 0203 hrs

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WASHINGTON : A sharp rise in automobile sales pushed up US retail spending by 1.4 percent in October, government data showed Monday in a positive sign for an economy heavily dependent on consumer activity.

The Commerce Department said overall retail sales rebounded from a 2.3 percent slide in September, in data made volatile by the government's "cash for clunkers" program that boosted sales in August, resulting in a sharp drop the following month.

Excluding autos and auto parts, retail spending was up 0.2 percent in the month, the data showed.

The report showed a stronger than an expected 0.9 percent rise for the overall index, but excluding autos was weaker than the consensus estimate of a 0.4 percent gain.

Over a 12-month period, sales were down 1.7 percent compared with October 2008.

Analysts said the retail data Monday were a mixed bag, with sharp declines seen at building supply and furniture stores to large gains at restaurants and nonstore retailers.

There was also a big downward revision to September retail sales growth, largely from lower auto sales.

But some analysts expect consumer spending to show improvements during the last quarter of 2009.

Consumer spending accounts for about 70 percent of the US gross domestic product, a basic measure of a country's overall economic performance.

"The October retail sales numbers were a very mixed bag, but signal that despite the consumer's gloomy mood, spending is improving," said Nigel Gault, chief US economist of IHS Global Insight.

He said while downward revisions to August and September retail sales suggested that consumer spending growth in the third quarter would also be revised lower, prospects for the fourth quarter seem good.

"Fourth quarter consumer spending now looks better than we had thought," Gault said.

But analysts are keeping a close eye on rising unemployment as the economy struggled to emerge from recession since December 2007.

The government said earlier this month that the unemployment rate shot up to 10.2 percent in October from 9.8 percent the previous month as another 190,000 jobs were shed even as the economy posted its first growth rate in a year in the third quarter.

The jobless rate was the highest since 1983, prompting renewed talk of additional government stimulus for an economy, which grew 3.5 percent in the July-September period.

"The consumer is helping the economy out of recession, but risks of retrenchment will remain uncomfortably high until the labor market stabilizes," said Ryan Sweet, a senior economist with Moody's Economy.com.

Despite encouraging increases in retail sales, "the road ahead is long" as sales still languishing 8.5 percent below their November 2007 peak, he said.

While October's data provide no information on the year-end holiday shopping season, Sweet said the increases in retail sales excluding autos over the past few months were encouraging as consumers appeared to be "less shell-shocked."

- AFP /ls