Autos lead big jump in September retail sales

Updated 5h 47m ago

WASHINGTON (AP) – Consumers stepped up their spending on retail goods in September, a hopeful sign for the sluggish economy.

They spent more on autos, clothing and furniture last month to boost retail sales 1.1% from August, the Commerce Department said Friday. That was the largest gain in seven months.

A second report Friday said businesses added to their inventories for a 20th consecutive month and their sales rose for a third month in August. Inventories increased 0.5%, matching July's gain. Sales at manufacturers, retailers and wholesalers climbed 0.3%, following a 0.7% July increase.

MORE: Read the report
The retail sales report said auto sales rose 3.6% to drive the overall September increase, which was up 7.9% from a year ago. Excluding autos, sales increased a solid 0.6% last month.

The report followed a weaker month of retail spending in August. And the government revised that month's sales figures up to 0.3% after initially reporting no gain.

Stocks rose after the release of the report, which is the government's first look at consumer spending each month.

Stronger spending could help tamp down concerns that the economy is at risk of a recession. Consumer spending is closely watched because it accounts for 70% of economic activity.

The increase "shows that households are not completely down and out," said Paul Dales, senior U.S. economist for Capital Economics. Dales said the data correspond with an annual growth rate of 2% for consumer spending growth in the July-September quarter.

Dales cautioned that weak hiring will likely prevent consumers from spending at this rate on a month-to-month basis.

"Sales growth is unlikely to remain this strong," he said. "So although a recession has become less likely, households still can't be relied on to drag the US economy out of its continued malaise."

The September gains were broad-based:

— Department stores sales increased 1.1%, a big turnaround from August when sales had fallen 0.5%. The drop was blamed in part on Hurricane Irene disrupting shopping along the East Coast.

— A larger category of general merchandise stores, which includes big-chain retailers including Wal-Mart and Target, showed a 0.7% rise last month after no gain in August.

— Specialty clothing stores sales rose 1.3%, after a 0.4% August drop.

— Sales were up 1.1% at furniture stores but edged down a slight 0.1% at hardware stores. That surprised economists, who expected more traffic from people seeking to repair damage from the hurricane.

— Gas station sales rose 1.2%.

Automakers reported a rebound in sales in September. Demand was high for SUVs and pickups even though a gallon of gas cost nearly $1 more last month than a year ago.

Major retailers also reported strong demand. The International Council of Shopping Centers said revenue rose 5.5% last month, compared to sales a year ago. Target, Limited Brands and Kohl's posted strong gains as consumers went for discounted merchandise.

For the holiday shopping period, the National Retail Federation, the nation's largest retail trade group, expects sales to rise 2.8%. That would be smaller than the 5.2% increase during last year's holidays but slightly ahead of the 2.6% average increase for November and December sales the past 10 years.

The overall economy grew at an annual rate of 0.9% in the first six months of the year. That was the weakest growth since the recession ended in June 2009.

High unemployment and steep gasoline prices forced many consumers to cut back on spending this spring. Without more jobs or higher pay increases, they are likely to keep spending cautiously.

In September, the economy generated 103,000 net jobs. That's enough to calm recession fears, but it is far from what is needed to lower the unemployment rate, which stayed at 9.1% for the third straight month.

Employers have added an average of only 72,000 jobs in the past five months. That's far below the 125,000 per month needed to keep up with population growth. And it's down from an average of 180,000 in the first four months of this year.

Economists believe the economy will rebound in the second half of this year. But they expect only modest growth of around 2%. That's far below what is needed to significantly lower the unemployment rate.

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