U.S. Retail Sales Rise More-Than-Forecast 1.1%, Easing Recession Concern

Retail sales rose in September by the most in seven months, showing American consumers are helping the world’s largest economy fend off a slump.

Purchases grew 1.1 percent, exceeding the median forecast of economists surveyed by Bloomberg News, Commerce Department data showed today in Washington. Another report called into question whether gains in spending can be sustained as household confidence unexpectedly dropped this month.

Retailers like Macy’s Inc. (M) and Kohl’s Corp. (KSS) are among those planning to boost hiring, betting demand will hold up into the November-December holidays, the biggest selling season of the year. Stocks surged globally after the sales figures beat estimates and countries in the Group of 20 began talks to try to mitigate the European debt crisis.

“It looks like we’re going to be avoiding a recession,” said Michael Moran, chief economist at Daiwa Capital Markets America Inc. in New York, who projected sales would climb 1 percent. “Even though consumers don’t feel good, there is job growth going on and that is fueling some pickup in spending.”

The Standard & Poor’s 500 Index rose 1.7 percent to 1,224.58 at the 4 p.m. close in New York, capping its biggest weekly gain since July 2009. Treasury securities fell, sending the yield on the benchmark 10-year note up to 2.25 percent from 2.18 percent late yesterday.

Survey Results

The median forecast of 85 economists surveyed by Bloomberg called for a 0.7 percent rise in purchases last month. Estimates ranged from gains of 0.2 percent to 1.6 percent. The Commerce Department revised the August figure to show a 0.3 percent increase from little change previously reported.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 57.5 this month from 59.4 in September. The median estimate of economists surveyed called for a reading of 60.2.

The gauge of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 47, the lowest since May 1980.

“For the most part, the labor market has held up OK so far, and ultimately the spending numbers are driven by spending power more than anything else,” said Jim O’Sullivan, chief economist at MF Global Inc. in New York. “That’s not to say that we should dismiss the big drop in confidence as irrelevant. It does keep alive the possibility that the labor market will weaken more over the next couple of months and in turn consumer spending will weaken.”

Broad-Based Gains

Ten of the 13 major retail categories showed increases last month, led by auto dealers and clothing stores.

Vehicle sales climbed 3.6 percent, the most since March 2010, today’s report showed. The results are in line with industry figures.

Cars and light trucks sold at a 13.1 million seasonally adjusted annual rate in September, according to Woodcliff Lake, New Jersey-based Autodata Corp. The rate was the highest since April’s 13.2 million, when lost output caused by Japan’s earthquake and tsunami began crimping supply of cars and parts.

Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales also rose 0.6 percent, the most since March, after a 0.4 percent August increase.

Consumers, for now, are weathering a stagnant job market. Payrolls climbed by 103,000 workers in September and the jobless rate was 9.1 percent for a third month, Labor Department figures showed earlier this month.

Unemployment a Concern

“The U.S. has a long-term issue with unemployment that for the average consumer is going to remain challenging,” Blake Jorgensen, chief financial officer for Levi Strauss & Co., said in a telephone interview this week from San Francisco, where the closely held company is based. “We’re remaining cautious.”

President Barack Obama, lawmakers and the Federal Reserve face pressure to spur the jobs needed to support household spending, which accounts for about 70 percent of the economy.

The Fed last month decided to extend maturities of its Treasury holdings while selling an equal amount of shorter-term securities, as part of the so-called Operation Twist, in a bid to push down long-term borrowing costs. Obama has vowed to keep pressing Congress to vote on individual components of his $447 billion jobs bill that was blocked in the Senate on Oct. 11.

Budget Shortfall

The government today report its annual budget deficit exceeded $1 trillion for a third consecutive fiscal year, showing how difficult it will be for legislators to agree on new proposals. The shortfall registered $1.3 trillion in 2011, up from $1.29 trillion the prior year and the second-highest on record, according to Treasury Department data. It reached $1.42 trillion in 2009, the highest ever.

Some retailers are looking beyond the fiscal headwinds. Macy’s, the second-biggest U.S. department-store chain, is increasing hiring of mostly part-time workers by 4 percent for the holiday season to match sales growth in its stores and online. Kohl’s, the fourth-largest U.S. department-store chain, said last week it may hire more than 40,000 holiday workers, a 5 percent increase from 2010.

A third report today showed inventories at U.S. companies rose more than forecast in August, signaling businesses are anticipating a pickup in sales. The 0.5 percent increase in stockpiles matched the gain in July that was larger than initially estimated, according to the Commerce Department.

The increase was led by the biggest jump in auto and parts stockpiles in more than a year, showing supply-chain constraints from Japan’s March disaster have abated.

Also today, Labor Department figures showed prices of imported goods unexpectedly rose in September, reflecting a jump in metals and higher costs of crude oil that have since receded. The 0.3 percent gain followed a revised 0.2 percent decrease in August.

To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net; Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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