Excluding plunge in autos, retail sales grow in September

The frugal consumer appears to be opening her wallet a bit more. Retail sales fell 1.5 percent in September, the U.S. Commerce Department announced Wednesday -- but, excluding a 10.4 percent plunge in auto purchases, retail sales rose 0.5 percent, a statistic that suggests the retail sector is gradually improving.

Economists surveyed by Bloomberg News had expected September retail sales to fall 2.1 percent and rise 0.3 excluding autos. Retail sales rose a revised 2.2 percent, in August, down from the previously released 2.7 percent. For the first nine months of 2009, retail sales are down 8.8 percent to $3.04 trillion.
Further, the 10.4 percent plunge in auto sales reflected the end of the U.S. government's $4,500 cash-for-clunkers subsidy program. In August, auto sales surged 7.3 percent.

Overall, retail sales have risen in three of the last five months – a statistic that, at first glance, would appear to be modest, but it represents a substantial improvement from the deep retail sales declines of the summer and fall of 2008, when the financial crisis intensified.

In September, furniture sales increased 1.4 percent, clothing increased 0.5 percent, general goods merchandise rose 0.9 percent, health and personal care items increased 0.8 percent, gasoline sales climbed 1.1 percent, leisure-oriented goods rose 0.1 percent, and sales of electronics goods were unchanged. Building materials fell 0.2 percent.

Investors should follow the retail sales statistic because it's a comprehensive measure of durable and non-durable goods sold at stores and it provides clues about overall consumer spending. Historically, consumer spending has accounted for 60-65 percent of U.S. GDP. Hence, if retail sales rise, that provides a fairly reliable indicator of the economy's strength.

Analysis: Overall, a good September retail sales report. Ignore the top-line statistic, as it was skewed lower by the plunge in auto sales stemming from the end of the cash-for-clunkers program. The better-than-expected 0.5 percent rise in the ex-auto retail sales stat indicates that retailers' better price points and new products are attracting some consumers back into stores. However, consumers remain cautious: in no way are American citizens returning to their spend-with-abandon ways. Even so, the September data does provide further evidence of incremental improvement in the retail sector -- another positive sign for the U.S. economy.
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