We'd Rather Buy iPhones and Video Games Than Clothes or Gas: Retail Sales Data

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We'd Rather Buy iPhones and Video Games Than Clothes or Gas Though Americans aren't buying homes, clothes, gas, or furniture, we haven't stopped spending on gadgets, according to Tuesday's retail sales report from the Department of Commerce.

Overall retail sales rose 0.6% in October, beating analysts' estimates. Meanwhile, electronics and appliance store sales jumped 3.7%, the highest increase in two years. Last time there was a spike like that was November 2009, which benefited from a jolt from Black Friday and holiday shopping at the low-point of the recession.

October is typically a slow month for retail, though data shows that people didn't hold back on treating themselves to the most expensive products this year. According to Scott Hoyt, senior director of consumer economics at Moody's Analytics, many analysts credit the release of the iPhone 4S on Oct. 14 with a large fraction of the electronics sales increase. The new iPhone sold 4 million units in its first weekend, an all-time record for a phone.

"[The iPhone 4S] is probably responsible for the growth in the appliance and electronics store segment," Hoyt says of Tuesday's report. "Despite high unemployment and only modest job growth, and in spite of extraordinarily low levels of consumer confidence, there is some budgetary freedom and pent up demand. That's starting to matter."

As the report does not track who is shopping, it's impossible to know how much of the increase was from spending by affluent Americans. Still, the overall trend favoring electronics over other types of products certainly can't be pinned on a few iPhone junkies. Sales at clothing stores, gas stations, and home furnishing stores actually declined in October, according to the report.

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Sean Murphy, senior analyst at the Consumer Electronics Association, says that in the past few years, gadgets and computers once considered inessential have become "the new normal."

"These products have gone from being toys to necessities," he explains. New releases every few months improve products and encourage consumers to spend, making each version better integrated in our daily lives.

"There's become a symbiotic relationship between the industry and consumers," Murphy explains. "People's relationships with the devices evolve. Behavior patterns change even as technology changes."

And unlike other tools such as cars (which also showed a surprising rise in October's numbers), people tend to replace electronics like smart-phones frequently.

"Even as the country is tightening its belt, consumer electronics sales continue to do well," Murphy says. "This speaks volumes about the industry."

Economists predict that with these kind of numbers, holiday shopping numbers will also be on par with last year -- in other words, good. Electronics may well hold center stage. Call of Duty: Modern Warfare 3 has already broken sales records for the most units of a video game sold on opening day. The Kindle Fire, released Monday, is expected to sell up to 5 million units before the year's end.
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