October retail sales rise slightly, beat predictions

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.

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.

But excluding auto sales, retail demand rose 0.2 percent, half of the expected 0.4-percent rise. The government also
revised the September performance down to show 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 a 0.5-percent drop in 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.

Even with the better-than-expected retail sales performance
in October, 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 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.

The Reuters/Michigan survey of consumer sentiment declined
sharply in early November to a reading of 66 after rising above 70 in September and October. Attitudes about the short-term
economic outlook collapsed to the lowest level since April and consumers’ assessments about the state of their personal finances
also deteriorated sharply.

For October, the nation’s big retail chains reported some of their best results since
April 2008. Sales open at least a year rose 2.1 percent in October compared with activity in October 2008, according to the
International Council of Shopping Centers-Goldman Sachs. That result beat economists expectations for a 1-percent rise.

Affluent shoppers, who had been tight with their purse strings since the financial meltdown struck a year ago, spent
more for designer clothes, helping deliver solid gains for Saks Inc. and Nordstrom Inc.

Other bright spots were
Costco Wholesale Corp., TJX Cos., which operates T.J. Maxx and Marshalls, and Gap Inc.

Many stores were helped
by cooler weather which increased sales of fall clothing. Sales also got a boost from early holiday discounts offered by some
retail chains.