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Retail sales rise more than expected in Sept.

Americans spent more money on cars, furniture and at hardware stores to boost retail sales to a third monthly increase in September.
/ Source: news services

Americans spent more money on cars, furniture and at hardware stores to boost retail sales to a third monthly increase in September.

Retail sales rose 0.6 percent in September, the Commerce Department reported Friday. That followed an even better 0.7 percent August increase, the biggest advance since March.

Excluding autos, sales rose 0.4 percent in September after a 1 percent August gain.

The string of increases in retail sales since July followed declines in May and June. Those had raised worries that the country could be in danger of toppling back into recession. Economists caution that while the economy is growing, it will be sub-par as long as households face high unemployment and weak income growth.

Consumer spending is closely watched because it accounts for 70 percent of economic activity.

Auto sales, which had fallen 0.5 percent in August, rose 1.6 percent in September, the best showing since March. Economists had predicted the September increase in auto sales based on reports from automakers. Those reports showed sales during the month had come in at an annual rate of 11.76 million units, slightly better than the August pace. Still, it was far below the pre-recession level of 16 million sales in 2007 -- just before the recession began.

The strength outside of autos came in big gains at furniture stores. Sale in that category rose 0.5 percent, the best showing since July. Electronic and appliance stores posted a 1.5 percent rise, the best since February. Sales at hardware stores rose 0.6 percent, the biggest increase since April.

Sales at general merchandise stores, a broad category that includes department stores and the nation's big chains such as Wal-Mart and Target, showed no increase last month. But the flat reading followed a 0.5 percent jump in August, which had been fueled by back-to-school shopping and discounting by many retailers.

Sales at specialty clothing stores dropped 0.2 percent in August after posting a 0.5 percent rise in July.

Even with the solid overall gain in September, analysts did not view it as a sign the economy is getting set to take off.

Indeed, sales in August barely budged, the Commerce Deparment reported Friday, although inventories at U.S. businesses rose strongly.

Inventories rose 0.6 percent, slightly more than analysts' expectations for a 0.5 percent gain. Inventories in July were revised to up 1.1 percent, initially reported as a 1 percent increase. However, business sales in August rose only 0.1 percent, causing the inventory to sales ratio, which measures how long it takes to sell current inventories, to increase to 1.27 months. This gauge was at its highest pace since November.

The concern is that consumer spending will not rebound until households have the income growth to spend at a faster pace. And the income growth will not come until businesses start hiring back laid-off workers at a stronger clip.

The Labor Department reported last week that the nation's unemployment rate remained stuck at 9.6 percent in September. The country saw a net loss of 95,000 jobs.

Unemployment has been at or above 9.5 percent for a year and two months, the longest stretch since the Great Depression.

The overall economy grew at an anemic pace of just 1.7 percent in the April-June quarter. Many analysts believe the economy will limp along at a rate below 2 percent in the last half of this year.