US retail sales grew more than expected last month as vehicle purchases bounced back from a deep slump, but non-auto sales edged up just slightly, suggesting consumers remain cautious. Other data on Monday showed New York state manufacturing activity slowed in November, for the first time in four months, further highlighting the uneven nature of the economic recovery from the worst recession in 70 years.
The Commerce Department said total retail sales increased 1.4 percent last month after dropping 2.3 percent in September. Excluding autos, sales were up just 0.2 percent after a 0.4 percent rise the prior month. Financial markets had forecast retail sales rising 1 percent last month from a previously reported decline of 1.5 percent. "I think we are moving in the right direction, but it's not a straight line higher.
-- Sales ex-autos rise for third straight month
-- New York state manufacturing activity slows
-- Business inventories fall at a slower pace
Until we see jobs data come in better than expected the consumer will continue to keep their wallet a little tighter and save," said Sean Simko, fixed-income portfolio manager at SEI in Oaks, Pennsylvania. The New York Federal Reserve Bank said its gauge of New York State manufacturing activity slowed to 23.51 in November from 34.57 in October, which was a five-year high. Activity was pulled down by a fall in new orders, while the employment measure dropped sharply.
Retail sales in October were boosted by a jump in new vehicle and parts sales, which surged 7.4 percent. Auto sales had slumped 14.3 percent the previous month following the expiration of the government's popular "cash-for-clunkers" incentive program in August that had buoyed demand for motor vehicles. Previously, the government had reported auto sales falling 10.4 percent in September.
With government stimulus behind the bulk of the economy's 3.5 percentage point growth pace in the third quarter, there are fears that rising unemployment will continue to weigh on consumer spending and hold back the recovery. The economy's growth in the July-September period followed four straight quarters of decline and probably ended the most painful US recession since the 1930s.
Even without the boost from auto sales, there were signs that consumer spending, which normally accounts for about 70 percent of the US economy, continued to improve in October, albeit slowly. Core retail sales excluding autos, gasoline and building materials rose 0.5 percent, advancing for a fourth straight month. But sales of building materials dropped 2.4 percent last month after falling 0.6 percent in September.
There was positive news for the economic recovery, with a second report from the Commerce Department showing business inventories fell 0.4 percent to $1.30 billion in September, the lowest level since November 2005. Markets had had expected a 0.7 percent drop, after a 1.6 percent fall in August. A moderation in the pace of inventory liquidation contributed almost 1 percentage point to the brisk growth rate in the third quarter.
Business sales fell 0.3 percent in September after increasing 1.1 percent in August. That left the inventory-to-sales-ratio, which measures how long it would take to clear shelves at the current sales pace, at 1.32 months' worth, unchanged from August. Weak demand for building materials saw Lowe's Cos Inc, the second-largest US home improvement chain, posting a 30 percent decline in quarterly profit in the July-September period as consumers put off big renovations and as the US housing market recovered only slowly.
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