US retail sales rose modestly as expected last month, but the underlying message from the consumer was strong at the start of the fourth quarter after record oil prices failed to deter shoppers.
The Commerce Department said yesterday that retail sales rose by 0.2 per cent in October after a sharp drop in auto sales was offset by solid growth in other areas.
US 10-year Treasury bond prices edged slightly lower after the report while the dollar hovered against the euro as dealers awaited the University of Michigan survey of consumer sentiment for November, due out at 9.45 a.m.
"I think it was a solid number on a few fronts. You have upward revisions to the previous month and the breakdown showed pretty good broad-based consumption," said Sophia Drossos, a currency strategist at Morgan Stanley in New York.
Wall Street had predicted the slight advance in payback from September's car-fueled performance. This was revised to show a 1.6 per cent gain compared with the 1.5 per cent gain that was initially reported.
Excluding auto sales, which can swing sharply from month to month, retail sales were up 0.9 per cent compared with forecasts for a 0.5 per cent gain and after a 0.8 per cent gain in September, revised up from 0.6 per cent.
Economists scrutinise retail sales as a dominant component in consumer spending which in turn makes up two thirds of US economic output and the evidence was encouraging.
"This is a pretty strong report. We had gasoline sales up quite a bit on price, but if you look away from that energy price spike and you take a look at sales excluding building materials, gasoline and autos... sales were still up 0.8 per cent on a non-annualised basis," said Steven Wieting, senior economist at Citigroup.
Sales of motor vehicles and parts declined 2.2 per cent, a performance that had been anticipated following September's strong incentive-induced 4.3 per cent surge as dealers cut prices to boost end-of-season sales.
But the numbers do show that record oil prices made themselves felt at the start of the fourth quarter.
Sales at gasoline stations jumped 4.3 per cent, reflecting the impact of crude oil prices of $55 a barrel during the month. Retail and food sales excluding gasoline declined by 0.1 per cent last month versus a rise of 1.7 per cent in September, although this series is historically quite volatile. Oil prices have since edged back under the $50/barrel threshold and sales in other areas were also solid.
General merchandise sales were also higher, advancing 0.9 percent after a 1.3 pe rcent climb in September, while clothing and accessories posted a three per cent climb, which was the largest monthly increase in two years.