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Retail sales rise 1.4 percent in October

BJ's employee Shelly LeRoy loads a cart with a customer's purchases at checkout at the BJ's Wholesale Club in Camp Hill, Pa. The Commerce Department said retail sales rose 1.4 percent last month, much better than the 0.8 percent gain economists had expected.
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  • By MARTIN CRUTSINGER - The Associated Press
  • Originally published November 16, 2009 at 10:39 p.m., updated November 16, 2009 at 10:45 p.m.

WASHINGTON - 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 afternoon trading. The Dow Jones industrial average added more than 145 points.

Meanwhile, Federal Reserve Chairman Ben Bernanke said the central bank will keep a close eye on the sliding U.S. dollar even as he pledged anew to keep interest rates at record-lows. Economists expect the Fed will hold rates near zero at its next meeting on Dec. 15-16 and into part of next year to help the recovery gain traction.

In remarks to the Economic Club of New York, Bernanke predicted the economy should continue to grow next year, but he warned of "important headwinds," including a weak job market and tight credit for small businesses and households.

Those forces "likely will prevent the expansion from being as robust as we would hope," he said.

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.

AP Economics Writer Jeannine Aversa contributed to this report.


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