Retail sales rise 1.4% in October

WASHINGTON (AP) — Retail sales rose more than expected in October due largely to a big rebound in auto sales. But broader consumer spending remains under pressure, raising questions about the durability of the recovery.

Last month’s jump in sales also followed a dismal September retail performance that was revised even lower by the government, and many analysts remain concerned about consumer demand going forward.

“Against a background of high unemployment, low income growth and tight credit, it seems unlikely that households will be able to spend more freely anytime soon,” Paul Dales, U.S. economist at Capital Economics, wrote in a research note.

The Commerce Department said Monday that retail sales rose 1.4 percent last month. Economists surveyed by Thomson Reuters had expected a gain of 1 percent.

On Wall Street, major stock indexes rose more than 1 percent in morning trading. The Dow Jones industrial average added more than 135 points.

But excluding auto sales, retail demand rose 0.2 percent, half of the expected 0.4 percent rise. The government also revised the September results down to a 2.3 percent decline, from the 1.5 percent drop initially reported.

The big swing in overall activity reflects the recent roller-coaster ride for auto sales. New car sales surged in August as shoppers rushed to take advantage of the government’s Cash for Clunkers sales incentives before they expired at the end of the month. Sales plunged in September.

For October, auto sales jumped 7.4 percent, recouping about half of the 14.3 percent drop in September. Automakers already reported that their sales rebounded last month to an annual rate of 10.5 million units, from 9.2 million in September.

The 0.2 percent increase in retail sales excluding autos was down from a 0.4 percent rise in September and was the weakest showing since July.

Sales also fell 0.8 percent at furniture stores and 0.6 percent at electronics and appliance stores. Sales were flat at gasoline service stations and posted a modest 0.2 percent rise at grocery stores.

Department store sales also grew 0.3 percent although the broader category that includes such big retail chains as Wal-Mart and Target posted a 0.8 percent rise. Analysts believe that in the current hard times many shoppers are relying more heavily on discount stores.

Consumer spending, which accounts for 70 percent of total economic activity, is being closely watched to see whether households will continue helping the economy to emerge from the worst recession since the 1930s.

The overall economy, as measured by the gross domestic product, grew at an annual rate of 3.5 percent in the July-September quarter, due largely to a rebound in consumer spending. It grew at a solid rate of 3.4 percent in the quarter, after having declined in three of the previous four quarters.

The concern is that spending will sag in the current quarter and going forward as effects of the government’s stimulus programs begin to wane and families continue to struggle with unemployment at a 26-year high of 10.2 percent and other problems.

Many economists believe there is the threat of a double-dip recession in which growth rebounds for a few quarters and then slips back.

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