Washington – Retail sales performed far better than expected in October as consumers took encouragement from falling gasoline prices to head back to the shopping malls.
The Commerce Department reported that overall sales dipped a slight 0.1 percent, but that was significantly better than the 0.7 percent decline economists had been expecting. The weakness came from a big 3.6 percent drop in auto sales, which have weakened with the removal of attractive discounts automakers had used during the summer.
Excluding autos, retail sales rose a solid 0.9 percent last month. The strength in sales last month was led by big gains at specialty clothing stores and department stores, lifting the outlook for the upcoming holiday sales season.
In other economic news, the Labor department reported that wholesale prices rose by 0.7 percent in October after an even sharper 1.9 percent increase in September.
However, excluding food and energy costs, so-called core inflation fell by 0.3 percent in October, the biggest one-month decline in more than two years.
Also working to hold back retail sales in October was a 0.8 percent decline in sales at gasoline stations, a drop that reflected a big retreat in pump prices. Excluding autos and gasoline, retail sales rose a solid 1.1 percent in October, the best showing in this category since last April.
Economists closely watch the performance of consumer spending since it accounts for two-thirds of total economic activity.
Economists believe that the impact of hurricanes Katrina and Rita, which caused energy prices to hit record levels, will curtail economic activity in the second half of this year. However, they believe the impact will be temporary, given the fact that energy prices have fallen significantly since early September.
