Friday, Nov. 12, 2004 | 9:29 a.m.
WASHINGTON -- Consumers, after a big spending spree in September, grew more cautious last month, with retail sales edging up just 0.2 percent, the government reported today.
The Commerce Department said that the small October increase followed a huge 1.6 percent jump in September, which had been the best showing in seven months.
The slowdown last month reflected a big 2.2 percent decline in auto sales. Without this big decline, retail sales would have risen by 0.9 percent last month, the best showing since last May, as various sectors outside of autos showed significant strength.
Consumer spending, which accounts for two-thirds of the total economy, is being closely watched as retailers head into the all-important Christmas shopping season. The big jump in oil prices earlier this year jolted consumers and slowed the overall economy dramatically.
However, in recent months, growth has rebounded and analysts are forecasting that the economy should finish the year on a strong note. This view was bolstered last week with a report that businesses created 337,000 new jobs in October, the best showing since March and double what had been forecast.
Still, worries remain. Analysts are concerned because consumer confidence took a hit in October, falling to a seven-month low as Americans worried about how high energy prices might go. But since hitting record levels of around $55 per barrel, oil prices have been retreating.
Retail sales have been on a rollercoaster for most of this year with a strong month often followed by a plunge in demand, reflecting the fortunes of auto dealers, who have been forced to return to attractive sales incentives to lure shoppers back into their showrooms. The 2.2 percent drop in car sales last month had followed a large 4.3 percent gain in September.
The strength in sales last month reflected gains in sales at clothing and accessory stores, department stores, food and beverage stores, gasoline stations and furniture stores.
In addition to the big drop in auto sales, other areas of weakness last month were sales at building supply and garden stores, which fell by 1.1 percent, and sales at electronics and appliance stores, which edged down a slight 0.1 percent.
The Federal Reserve on Wednesday boosted a key interest rate for a fourth time this year with Fed officials reporting improvements in economic growth and job hiring despite the big jump in energy costs.
Last week, the nation's retail stores reported that the outlook for the all-important holiday shopping season had brightened somewhat as many national retailers reported sales gains.
Many mall-based apparel stores such as Limited Brands and Talbots saw a rebound in spending, helped by cooler weather. However, Wal-Mart and other discount merchants reported they had another month of lackluster sales.
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