The Commerce Department announced that U.S. retail sales rose 1.4% in October. Although analysts had anticipated a 1% jump in retail sales, October’s rise is largely due to the turnaround in auto sales.
The increase in auto sales, of course, came mostly from the cash for clunkers program. It was a sharp rebound following the 2.3% drop in September. Excluding the increase in auto sales, retail sales increased by a much more modest 0.2% in October compared to a 0.4% increase in the previous month.
MSNBC reported that stock indices rose on news of better than expected rise in U.S. retail sales. Earlier this week, the Dow Jones Industrial Average advanced 139 points. Investor have remained positive about the recovery as major retailers, including Abercrombie & Fitch Co. (ANF:NYSE), Kohl's Corp. (KSS:NYSE), Macy's Inc. (M:NYSE), Urban Outfitters Inc. (URBN:NASDAQ) and Wal-Mart Stores Inc. (WMT:NYSE), reported better numbers than expected.
More retailers are forecasted to release earnings this week, including home-improvement retailers Lowe's (L:NYSE) and Home Depot (HD:NYSE). The Kansas City Star says this will provide another gut check on how American consumers are spending their dollars. Other big retailers, including Target (TGT:NYSE) and The Limited (LTD:NYSE), will announce their earnings this week too.
According to RTTNews, a recent Gallop poll shows that Americans plan to spend around the same on holiday gifts this shopping season as they did last year. The poll, which surveyed 1,008 adults, states the average amount Americans expect to spend during the upcoming holiday retail season is $638.
Retail sales are particularly important when assessing the outlook for the global economy. Without the help of U.S. consumer spending, which accounts for around 70% of the U.S. economy, any global economic recovery will be modest. According to AOL Money, broader consumer spending remains under pressure, raising questions about the durability of the recovery.
One big question that will drag down hopes of economic recovery is the unemployment rate. Employers shed another 190,000 jobs from their payrolls over the last month. That brings the total number of jobs lost to 7.3 million since the recession began in December 2007. The Houston Chronicle states that “October marked the 22nd month in a row of job cuts for a total of 15.7 million Americans who sought work last month but were unable to find any.”
However, unemployment remains a lagging indicator. In the face of an unemployment rate not seen in 26 years, the U.S. economy seems to be showing signs of recovery. The American economy last experienced growth in the second quarter of 2008, when it grew 2.4%. And it seems that for now at least, the run of good news for the world’s largest economy continues.
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