September retail sales inch up

By Ylan Q. Mui
Washington Post Staff Writer
Friday, October 15, 2010; 9:58 PM

Consumers loosened their grip on their wallets in September, pushing retail sales higher for the third consecutive month, according to government data released Thursday.

The 0.6 percent increase from the month before was larger than many economists had expected, while August's gain was revised upward to 0.7 percent. The results suggest that consumers are spending enough to keep the country out of recession, but analysts say they are unlikely to go much further.

"There is no double dip coming," said Steve Blitz, economist for Majestic Research. "Right now, stepping away from the idea that the economy is about to contract again is a good thing."

The increase was driven in part by a 1.6 percent boost in auto sales, the largest gain of any sector. Excluding autos, retail sales rose 0.4 percent, the Commerce Department reported.

Electronics and appliance stores did particularly well in September, with sales increasing 1.5 percent after slipping the previous month. Industry experts attributed the bump to late back-to-school shopping as students stocked up on laptops and other tech necessities.

Not all back-to-school sectors fared as well. Clothing stores and department stores were the only two categories in which sales declined from a month ago, down 0.2 and 0.1 percent, respectively.

But one thing the data showed clearly was that consumers have recovered significantly since last year. Compared with September 2009, total retail sales jumped 7.3 percent and nearly every category showed improvement. Online and catalogue retail sales skyrocketed 14.4 percent.

Economists attributed part of the increase to consumers' improved outlook. Though the unemployment rate continues to hover near 10 percent, those who are employed are less worried about losing their jobs, analysts said.

"That gives you just enough confidence to go out and spend when you have to," Blitz said.

In addition, much of the contraction in consumer spending had been driven by shoppers who had discretionary income but chose not to spend it. The revival of the luxury sector, for example, suggests that those fears may be beginning to fade.

"I'm not suggesting that the consumer segment will be as vibrant as it was three or four years ago," said Lawrence Creatura, portfolio manager at Federated Investors, which has significant investments in the consumer sector. "But the forecast of consumer Armageddon seems a very low probability."

Still, shoppers remain skittish about the economic recovery, leaving the retail industry uncertain about the upcoming holiday season. Forecasts predict that retail sales will be flat to up about 2 percent during November and December, the biggest shopping months of the year.

Early results of a monthly survey of consumer sentiment by the University of Michigan and Reuters have dipped 0.3 points this month to 67.9. That was driven by a significant 6.6-point drop in consumers' assessment of current economic conditions, hitting the lowest level since November. By contrast, their expectations for the future improved - a reversal of last month's trends.

"The American consumer psyche is showing signs of improving its outlook and still painfully adjusting to the slow pace of the recovery," said Chris Christopher, an economist with IHS Global Insight.

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