Retail sales rise 1.1% in September, beating expectations

With the holiday season fast approaching, shoppers may be shaking off concerns about looming economic problems and opening their wallets to spend.

New economic data released Monday showed overall retail sales, including auto sales and gasoline, rose a better-than-expected 1.1% in September from the previous month, according to the Commerce Department, boosting optimism that the coming months will be a good one for retailers.

Retail experts were hopeful that the numbers were a sign that shoppers would be hitting the malls in the coming months.

"In spite of the uncertainty and unease surrounding our nation's high unemployment and long-term fiscal challenges, consumers continue to spend and shop," said Matthew Shay, president of the trade group National Retail Federation. "The American consumer is holding their own in this economic environment."

September was the third straight month of increases in retail sales, and the government even revised upward its figures for August. Rising home sales, a rallying stock market and an improving job market have all nudged people to treat themselves to something new, analysts say.

One sign of optimism, experts said, was that shoppers felt comfortable splurging on more than 5 million Apple iPhone 5s in the first three days after its launch.

Workers were finally seeing their wages rise faster than the cost of gas and other necessities, said Chris Christopher, an economist at IHS Global Insight. "Consumers are feeling better and consumer confidence has increased," he said. "We think holiday sales will be relatively better going forward."

Auto sales, which rose 1.3% in September, have helped fuel growth as drivers who have held onto their cars during the recession finally shop for fresh wheels, said Marshal Cohen, chief industry analyst at research firm NPD Group Inc.

"This growth pattern at retail says shoppers want new and exciting products to shop," Cohen said. "Provide them with a good reason to spend and they will, despite the distractions of higher costs, the election and even crazy weather."

Economists had expected a more modest 0.8% increase in retail sales in September, according to a survey by Bloomberg News. The recent gains also helped reverse consumer caution in the first half of the year, including month-over-month drops in spending in April, May and June.

Even taking out the auto category, retail sales were up 1.1% in September. Clothing and accessory sales increased 0.6%, while electronics and appliance stores showed a 4.5% rise.

"You can forget that old rule of thumb about three consecutive declines in retail sales, watch out, means a recession," said Chris Rupkey, chief financial economist for the Bank of Tokyo-Mitsubishi in New York. "Calling attention to those declines in April, May and June scared people unnecessarily and amounted to nothing."

He said Monday's data show that "consumers are out in force, buying everything that isn't nailed down."

The healthy showing contrasts with a 0.8% gain among major retail chains in September, which Thomson Reuters reported Oct. 4. Analysts at the time said the tepid sales growth reflected shoppers taking a breather from back-to-school shopping before plunging into the holiday season.

The retail sales increase comes amid other positive economic news, including the unemployment rate dropping sharply to 7.8% in September and consumer confidence reaching a five-year high last month, according to a leading gauge from Thomson Reuters and the University of Michigan.

Despite the optimism, economists are still concerned that consumers may be discouraged from shopping by a trifecta of problems ahead: stubbornly high gas prices, rising food costs induced by drought, and spending cuts and tax increases that will go into effect next year unless Congress finds a compromise.

"The holidays won't be as strong as the last two years," Christopher said, "but it will still be relatively reasonable."

Puzzanghera reported from Washington and Li from Los Angeles.

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