WASHINGTON - A surge in auto purchases helped lift U.S. retail sales in October by the largest amount in seven months. But excluding autos, retail sales rose more modestly.
October marked the fourth straight increase in retail sales after declines in May and June. Those drops had raised fears about the economic recovery. Still, economists say consumers probably aren't spending enough to lift sales growth above the lacklustre pace of the past six months.
Consumers are still struggling with scant income gains, high debts and painfully high unemployment, which remains stuck at 9.6 per cent even though the recession ended more than a year ago.
Paul Dales, U.S. economist at Capital Economics, interpreted October's retail sales as a sign that consumption growth is improving. He cautioned that spending remains too tepid to drive economic growth higher in the current quarter. Consumer spending is closely watched because it accounts for 70 per cent of U.S. economic activity.
Overall retail sales rose 1.2 per cent in October, the U.S. Commerce Department said Monday. That was nearly double the gain that had been expected and the largest increase since March. But excluding autos, sales rose 0.4 per cent.
In a second report, the government said inventories held by businesses grew 0.9 per cent in September. It was the ninth straight monthly gain. And total business sales rose 0.5 per cent, the best showing since July.
Steadily higher inventories and sales are seen as signs that the economic recovery will continue. Inventory rebuilding has provided support for the economy.
For October, sales at auto dealerships rose five per cent. That gain had been expected because of reports from automakers that October auto sales rose to an annual rate of 12.3 million units. That increase was the best monthly showing since the government's Cash for Clunkers program sent sales surging in August 2009.
Outside of autos, sales at general merchandise stores, a category that includes department stores and big chains such as Wal-Mart Stores Inc., rose 0.2 per cent in October after a slight 0.1 per cent rise in September. Sales at specialty clothing stores fared better: They rose 0.7 per cent after having fallen 0.4 per cent in September.
The big U.S. retailers had reported lacklustre sales in October. Analysts ascribed some of the blame to an unusually warm October that lured shoppers to other activities and away from the malls. The International Council of Shopping Centers said its index of sales turned in its poorest showing in October since last April.
Sales at hardware stores increased a solid 1.9 per cent in October. Sales at gasoline stations rose 0.8 per cent, an increase that partly reflected higher prices at the pump. Sales at furniture stores and electronics stores both posted 0.7 per cent drops.
Lowe's Cos. on Monday reported that its third-quarter profit rose 19 per cent but said shoppers remained guarded in their spending. CEO Robert Niblock said uncertainty about the housing and job markets is pressuring the home-improvement industry.
Still, some analysts noted that unlike low- and moderate-income Americans, many higher-income consumers are spending freely. Upscale department store chain Nordstrom Inc., for instance, on Monday reported a 43 per cent rise in third-quarter net income and raised its earnings outlook.
"The wealthy are back and willing to spend conspicuously, while the majority of households continue to stick to necessities and shop for deals," Diane Swonk, chief economist at Mesirow Financial, wrote in a research note.
