Consumers Loosen Purse Strings in Oct.
American consumers shrugged off stock market jitters and overseas economic turmoil and eagerly bought new cars and clothing in October at muted prices, signaling a healthy Christmas shopping season ahead.
Government reports on Friday, plus a fresh indicator of resurgent consumer confidence in November, highlighted the long-running U.S. expansion’s durability and fueled doubts that the Federal Reserve will trim interest rates again next week.
Total retail sales jumped 1% to a seasonally adjusted $227.1 billion last month--the strongest pickup in five months and twice what was anticipated--after a 0.3% gain in September, the Commerce Department said.
Separately, the Labor Department said its producer price index, a gauge of wholesale prices, rose a modest 0.2% last month following a 0.3% September increase.
“Inflation is barely a memory,” said economist Bill Cheney of John Hancock in Boston.
A rush to auto dealer showrooms powered the retail sales gains. New-car sales soared 2.6% to $55.83 billion after a 0.9% rise in September, boosted by generous discounting and fresh supplies of popular models on General Motors dealers’ lots after summer strikes had depleted stocks.
It was the strongest month for auto sales since July 1997, when they also increased 2.6%.
Sales excluding autos were up 0.5%, as all broad categories of goods managed at least modest gains and most did better. With cool weather and new fall fashions in stores, clothing sales increased 1.9% to $10.3 billion, reversing a 3% September decline.
Consumers have perked up from a bout of summer anxiety. A University of Michigan survey on Friday, issued only to paying customers, showed its consumer confidence index rose to 102.4 in November from 97.4 in October.
The prices report, despite last month’s pickup, showed wholesale prices have fallen 0.7% since October 1997, reined in by slumping global demand for oil and other commodities.
Energy costs rebounded, rising 1.2% after a 0.1% drop in September, primarily because gasoline prices rose 5.7% in October. But heating oil costs fell 0.4%.
The closely watched core index, which strips out volatile food and energy prices, inched up just 0.1% after a 0.4% gain in September.
“Producers simply can’t raise prices in the competitive global marketplace,” said Jerry Jasinowski, president of the National Assn. of Manufacturers.
Economist Cynthia Latta of DRI/McGraw Hill Inc. in Lexington, Mass., said a late October pickup in stock prices had revived consumer spending, which accounts for about two-thirds of the U.S. economy.
“Consumers are really kind of shaking off their worries and don’t seem to feel anything from the Asian slowdown,” Latta said, adding that she still thought the Fed might ease rates on Tuesday.
“If they really believe the economy is going to slow in 1999, then a rate cut is justified,” Latta said.
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Retail Sales
In billions of dollars, seasonally adjusted:
October, 1998: $227.1 billion
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Producer Prices
Index of finished goods prices; 1982=100; seasonally adjusted:
October 1998: 130.9
