US retail sales rise in Oct, signalling continued growth

15 November 2011 19:19  [Source: ICIS news]

WASHINGTON (ICIS)--US retail sales rose by 0.5% in October from September, the Department of Commerce (DOC) said on Tuesday, a stronger gain than analysts had been expecting and the fifth straight month of growth in consumer spending.

In its monthly report, the department said seasonally adjusted retail sales were at $397.7bn (€290.3bn) in October compared with the September sales figure of $395.5bn, a gain of 0.5% month-to-month and a 7.6% advance from September 2010 retail sales.

Analysts had been anticipating a more modest October advance in retail sales of around 0.1%.

Although the October sales gain was not as strong as the 1.1% jump recorded for September, it is still a healthy advance and offers further evidence that the US economy is not tipping toward a new recession.

Consumer spending is the principal driving engine of the US economy, accounting for as much as 70% of all commercial activity and production.

The increase in retail sales for October also is a good omen because it suggests that US consumer spending will see even stronger gains for the rest of this year.

US retail sales typically pick up speed in the fourth quarter each year as consumers buy gifts in advance of the US Thanksgiving and Christmas holidays in late November and late December respectively.

The National Retail Federation (NRF) said October retails sales “saw impressive growth across the board and are an encouraging sign for retailers as the holiday season gets under way”.

NRF chief economist Jack Kleinhenz said “October retail sales support the assertion that consumers have a distinct desire to spend, bolstering hopes for solid sales growth in November and December”.

“This momentum bodes well for this holiday season,” he added.

However, other Commerce Department data show that US consumers’ incomes have been flat and even declining in recent months, when adjusted for inflation, and personal savings rates also have declined.

This indicates that increases in retail sales and consumer spending over the last five months have been financed in part by increased debt loads – suggesting that consumer spending could turn sharply down in early 2012 when the holiday season is over.

In a separate report on Tuesday, US Federal Reserve economists warned that the odds of a new US recession in early 2012 are greater than 50%.

($1 = €0.73)

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By: Joe Kamalick
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