Auto Deals Drive Retail Sales

Consumers flocked to new-car showrooms in October, shaking off the shock of the Sept. 11 attacks to snatch cheap financing deals and driving retail sales up at a record pace, the government said Wednesday.

The Commerce Department said total retail sales zoomed ahead by 7.1% to a seasonally adjusted $306.83 billion, the strongest surge for any month on record, after shrinking by 2.2% in September.

The Commerce Department began calculating the sales data in 1968 on one basis and changed its method for doing so in 1992, but a department official said October’s sales increase was a record by either measure.

Zero-percent financing offered by U.S. auto makers and cut-rate deals by some foreign companies fueled the unexpectedly strong retail jump.

Auto-dealer sales soared a record 26.4% to $87.4 billion after declining 4.5% in September.

In the wake of the attacks, General Motors Corp. initiated a “Keep America Rolling” program, offering financing without interest on all its cars and trucks. Ford Motor Co. and DaimlerChrysler were forced to match that for competitive reasons though analysts say it is costing all three companies dearly to do so.

Sales rose 1% last month when autos were stripped out after falling 1.5% in September. Both with and without autos, retail sales handily beat analysts’ forecasts.

“Americans are recovering from their funk pretty darn quickly and it takes an awful lot to stop Americans from spending money,” said economist David Wyss of Standard & Poor’s in New York.

Still, analysts said the surprisingly strong sales data did not change the picture of an economy that suffered a blow to confidence from the attacks on the World Trade Center and the Pentagon and that is undergoing a contraction.

The U.S. economy shrank at a 0.4% annual rate in the third quarter and is expected to keep contracting in the current fourth quarter, thus meeting the generally accepted definition of a recession in which national output weakens for two consecutive quarters.

But a rise in consumer spending may signal that any recession will be relatively brief and short-lived.

Sales rebounded in October from September declines in a range of categories from building materials to clothing and appliances and restaurant spending. The report implied that Americans who stayed home in September returned to malls, showrooms and entertainment centers last month.

Sales at clothing stores soared 6.9% to $14.3 billion in October, more than reversing a 5.9% drop in September.