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US consumer spending boosts recovery hopes

Washington, October 15, 2011

US consumers stepped up their spending on retail goods in September, a hopeful sign for the sluggish economy.

They spent more on cars, clothing and furniture last month to boost retail sales 1.1 per cent, the Commerce Department said on Friday. It was the largest gain in seven months.

Car sales rose 3.6 per cent to drive the overall September increase. Still, excluding that category, sales increased a solid 0.6 per cent.

The government also revised the August figures up to show a 0.3 per cent increase after initially reporting no gain.

Stronger spending could help tamp down concerns that the economy is at risk of a recession. Consumer spending is closely watched because it accounts for 70 per cent of economic activity.

The increase 'shows that households are not completely down and out,' said Capital Economics senior US economists Paul Dales.

He said the data correspond with an annual growth rate of 2 per cent for consumer spending growth in the July-September quarter.

Dales cautioned that weak hiring will likely prevent consumers from spending at this rate on a month-to-month basis.

'Sales growth is unlikely to remain this strong,' he said. 'So although a recession has become less likely, households still can't be relied on to drag the US economy out of its continued malaise.'

The September gains were broad-based.

Department stores sales increased 1.1 per cent, a big turnaround from August when sales had fallen 0.5 per cent. The drop was blamed in part on Hurricane Irene disrupting shopping along the East Coast.

A larger category of general merchandise stores, which includes big-chain retailers including Wal-Mart and Target, showed a 0.7 per centrise last month after no gain in August.

Specialty clothing stores sales rose 1.3 per cent, after a 0.4 per cent August drop.

Sales were up 1.1 per cent at furniture stores but edged down a slight 0.1 per cent at hardware stores. That surprised economists, who expected more traffic from people seeking to repair damage from the hurricane.

Petrol station sales rose 1.2 per cent.

The overall economy grew at an annual rate of 0.9 per cent in the first six months of the year. That was the weakest growth since the recession ended in June 2009.

High unemployment and steep petrol prices forced many consumers to cut back on spending this spring. Without more jobs or higher pay increases, they are likely to keep spending cautiously.




Tags: Car | recovery | Spending | US consumer | clothing |

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