Consumers Continue Retail Binge Into September

Sales reports from major retailers Thursday showed that Americans continued their shopping spree in September, hardly slowed by volatility in the stock market, stormy weather and rising interest rates.

Consumers also aren’t limiting their spending to malls, or to their money at hand, a Federal Reserve report showed.

Americans’ borrowing raced ahead in August at an annual rate of 9.6%, led by strong demand for loans for everything from autos and boats to education and vacation.

Retail sales reports were generally strong, although merchants lost business because of Hurricane Floyd, which battered the East Coast last month. The storm also boosted the number of Americans filing new claims for unemployment benefits to the highest level in more than two months.

“The hurricane did hurt some in September, but overall, sales were good, and all indications are that this will continue through the end of the year and into the Christmas season,” said Steve Paspal, senior retail analyst at Sovereign Asset Management, a subsidiary of John Hancock Funds.

Retailers continue to enjoy one of their strongest years in recent history amid a booming economy. But many merchants have worried in recent months that borrowing and spending would slow after the Federal Reserve raised interest rates twice this summer to try to keep the economy from overheating and to head off a resurgence of inflation.

While the Fed’s rate increases have unsettled investors and shaken the stock market, consumers so far haven’t slowed their spending or borrowing.

The Fed report showed consumers borrowed $10.8 billion more in August than during the month before. Analysts were forecasting a much smaller monthly gain of $6.5 billion.

The retail winners in September were the discount chains, such as Wal-Mart and Dayton Hudson’s Target, which continue to draw consumers with their wide selection and affordable prices. Kmart, however, reported disappointing sales because of aggressive price-cutting by competitors on back-to-school merchandise.

Unlike many other merchants, the discount chains benefited from Hurricane Floyd, with shoppers flocking to their stores to stockpile everything from flashlights to food.

Many department stores and specialty chains, however, were hurt by the storm, which caused extensive flooding that closed malls and roadways.

Surprising analysts was Sears Roebuck, which reported better-than-expected sales after months of disappointments.

Separately, the Labor Department reported that new claims for jobless benefits rose by 10,000 to reach 312,000 last week, the highest level since July 17. While the increase was bigger than many analysts expected, the total remains very low.