U.S. Sept. Retail Sales Rise 0.9%; Ex-Autos Up 0.7%

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10/13 09:50 U.S. Sept. Retail Sales Rise 0.9%; Ex-Autos Up 0.7% (Update2) By Vince Golle

Washington, Oct. 13 (Bloomberg) -- U.S. retail sales showed their largest gain in seven months in September, led by stepped-up purchases at auto dealers and higher prices for gasoline, government figures showed today.

Sales gained 0.9 percent last month following a revised 0.1 percent increase in August, the Commerce Department said. Excluding automobiles, sales rose 0.7 percent after a revised gain of 0.2 percent a month earlier.

The September numbers suggest that consumer spending rose at about a 5.5 percent annual rate in the third quarter, based on statistics compiled by Bloomberg News. Personal spending, which accounts for about two-thirds of economic output, had grown in the second quarter at a 3.1 percent annual rate that was the slowest in three years.

``The consumer is extremely resilient to higher energy prices,'' said Richard Yamarone, senior economist at Argus Research Corp. in New York. ``Full employment leads to higher confidence and higher incomes, and that leads to increased spending.''

Prices paid to U.S. producers rose in September, the first increase in three months, as oil, car and food costs soared, the Labor Department reported separately. The producer price index, a measure of prices received by factories, farmers and other goods makers, rose 0.9 percent last month after falling 0.2 percent in August and showing no change in July. The cost of food rose for the first time since April.

Core PPI Also Rises

The core rate of the PPI, which excludes energy and food costs, rose 0.3 percent in September after rising 0.1 percent a month earlier. Much of the core rate rise resulted from the biggest increase in car prices in five years and the largest gain in the cost of light trucks in 11 years.

U.S. Treasury securities fell and stocks rose after the reports. The 10-year Treasury note fell 3/16 point, pushing its yield up 3 basis points to 5.73 percent. The Dow Jones Industrial Average rose 20 points, or 0.2 percent, while the Nasdaq Composite Index rose 29 points, or 0.9 percent, in morning trading.

The September rise in retail sales was the biggest since a gain of 1.4 percent in February. Analysts expected a 0.6 percent increase in retail sales after a previously reported rise of 0.2 percent in August. Analysts had also called for a 0.5 percent increase in sales outside of autos following August's initially reported gain of 0.3 percent.

Compared with September of last year, retail sales were up 7.6 percent. That's up from the 6.9 percent year-over-year increase in August, today's Commerce Department statistics show.

Auto Sales Rise

September's increase in retail sales was led by a 1.4 percent increase in purchases at auto dealers, the largest gain since a 1.5 percent rise in February. Auto makers sold 17.9 million cars at an annual rate in September, compared with a 17.5 million pace in August, industry data showed. The September sales rate was the strongest since 18 million in April.

Discounts helped boost the industry's unit sales figures. DaimlerChrysler AG's sales excluding Mercedes-Benz rose 5.5 percent as discounts of as much as $3,000 pushed minivan sales up by 56 percent, the company said earlier this month. The company's truck sales rose 20 percent and followed an incentive program that started Aug. 2 and offered up to $3,000 cash back.

Gasoline service station sales rose 2.1 percent last month, reflecting a rise in fuel prices. The gain was the largest since sales jumped 2.9 percent in June. The price of gasoline at the pump was an average $1.59 a gallon last month. That's up from an average $1.51 a gallon in August, when gasoline prices started falling from a record high of $1.71 a gallon in June.

Furniture, Other Goods

Outside of service stations and auto dealers, sales also rose. Sales of furniture and home furnishings rose 0.8 percent after rising 0.6 percent in August. Sales also increased at grocery stores, clothing outlets, restaurants and drug stores.

Building materials showed the only decline, and may have been a reflection of lower prices for wood products. Lumber prices have fallen 35 percent since the start of the year. That's one reason that Home Depot Inc., the No. 1 home improvement chain in the U.S., warned yesterday its sales and profits would miss forecasts for the second half. Lowe's Cos., the No. 2 chain, has issued a similar warning.

While overall consumer spending probably grew faster than in the second quarter, it was still cooler than the 7.6 percent pace in the first three months of the year that was the fastest in 17 years. Before today's report, analysts had estimated third-quarter spending likely accelerated at a 4.5 percent to 5 percent annual rate.

A Slower Pace

``Underlying demand has clearly subsided from the red-hot turn-of-the-year pace, but remains firm,'' said Neal Soss, chief economist at Credit Suisse First Boston Inc. in New York, in a weekly report.

That's news that could comfort Federal Reserve policy-makers who are intent on keeping demand at a pace that won't be a strain on the economy's ability to produce goods and services. The Fed's policy-making Open Market Committee raised borrowing costs six times from June of last year through May this year. Since then, signs of slower growth were enough for Fed officials to refrain from raising rates.

After holding the line on rates at their last meeting Oct. 3, the central bankers said in a statement that ``demand has moderated to a pace closer'' to a rate that won't cause prices to accelerate.

``Overall, I would say the signs are the economy is moderating,'' Thomas Hoenig, president of the Kansas City Fed, said Tuesday after a speech in Albuquerque.

Rising fuel prices and declining stock values have been a brake on other consumer spending. The Dow Jones Industrial Average has declined 13 percent so far this year, while the Nasdaq Composite Index has dropped 24 percent.

Sales at retail stores open at least a year rose 3.9 percent in September, down from a 4.2 percent rise in August and a 6.7 percent increase in September 1999, according to Bank of Tokyo- Mitsubishi Ltd.

At Wal-Mart Stores Inc., the world's largest retailer, September stores rose 4.8 percent, down from the 7.2 percent increase in the same month a year ago. Gap Inc. said earlier this month that sales fell 8 percent, prompting Chief Financial Officer Heidi Kunz to declare October ``a big clearance month.''



-- Carl Jenkins (Somewherepress@aol.com), October 13, 2000


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