U.S. retail sales declined in September by the largest amount this year as car sales plummeted following the end of the government’s popular “Cash for Clunkers” rebate program. But outside of autos, sales were better than expected.
The Commerce Department said Wednesday that retail sales dropped 1.5% last month. That’s smaller than the 2.1% fall economists had expected, but still the biggest setback since sales dropped 3.2% in December.
Car sales plunged 10.4%, but excluding autos, retail sales rose 0.5%. That’s better than the 0.2% increase analysts expected.
Consumer demand, which accounts for 70% of total economic activity, is being watched closely by economists who worry that any recovery from the recession could stall due to the strong headwinds that households still face.
On Wall Street, the better-than-expected retail sales figures and surprisingly strong earnings reports from Intel Corp. and JPMorgan Chase&Co. pushed the Dow Jones industrials about 45 points away from the 10,000 mark, a level not seen in a year. Analysts had expected increases at general merchandise stores following reports last week from the nationwide retailers that sales grew in September compared with activity in September 2008. It marked the first year-over-year rise in sales after a year of declines, according to data from the International Council of Shopping Centers and Goldman Sachs.
American shoppers are hungry for markdowns, looking for sales signs at stores, while cashing in on a tax credit for first-time homebuyers and low mortgage rates and home prices. A late Labor Day and delayed school openings also helped retailers last month because consumers purchased some items in September that they would normally have bought in August.
Also Wednesday, the Commerce Department said businesses slashed their inventories 1.5% in August, the 13th straight decline and more than the 0.9% fall analysts had expected. Still, many economists say businesses soon may begin rebuilding depleted store shelves after more than a year of cuts. If that occurs, factory production will begin to rise and help bolster a broad recovery from the worst recession since the 1930s.
