Retail Sales Post Strong Gain In September

WASHINGTON (AP) _ Retail sales posted a stronger-than-expected gain in September as a big jump in auto sales helped offset weak demand for clothing. <br/><br/>The Commerce Department reported Friday that

Friday, October 12th 2007, 8:07 am

By: News On 6

WASHINGTON (AP) _ Retail sales posted a stronger-than-expected gain in September as a big jump in auto sales helped offset weak demand for clothing.

The Commerce Department reported Friday that retail sales increased 0.6 percent September, compared to August. That was double the gain that economists had been expecting and was also in contrast to reports Thursday of sluggish demand from the nation's leading retail chains.

The government data did show weakness at department stores and specialty clothing shops, where unusually warm weather dampened demand for fall clothing.

In other news, the Labor Department reported that wholesale prices jumped by 1.1 percent in September, pushed higher by gains in food and energy costs. Excluding those volatile categories, wholesale prices were up by a moderate 0.1 percent.

The weakness in sales at clothing stores was offset by another strong gain in auto sales, which jumped 1.2 percent in September following an even bigger 3.3 percent increase in August.

Sales at gasoline stations also rose strongly in September, up 2 percent following a 2.6 percent drop in August. However, this increase primarily reflected the fact that pump prices were rising last month after having declined the previous month.

The strength in retail sales should ease concerns that the worst slump in housing in 16 years and this summer's financial market turmoil could push the country into a recession.

The Federal Reserve last month cut a key interest rate for the first time in four years in an effort to make sure the economy's problems did not trigger a downturn. Some economists believe the Fed's September rate cut will be followed by another rate reduction in October.

The 1.1 percent rise in wholesale inflation, which followed a 1.4 percent drop in August, was more than double what economists had been expecting.

The big increase was driven by a 4.1 percent surge in energy prices in September, including an 8.4 percent jump in gasoline costs, the biggest rise for gasoline prices since March. Food costs surged by 1.5 percent.

The 0.6 percent rise in retail sales followed a more subdued 0.3 percent increase in August and was the biggest increase since a similar 0.6 percent rise in July.

Excluding autos, sales would have been up by 0.4 percent in September.

Outside of autos and gasoline, areas of strength included sales at grocery stores and electronics and appliance stores. Areas of weakness last month included department stores, down 0.5 percent; clothing stores, down 0.4 percent and furniture stores, down 0.6 percent. Furniture store sales have been hurt by the steep slump in home sales.