TOPICS > Economy

Retail Sales Up, but Auto Sales Sag Without ‘Clunkers’

BY Dave Gustafson   October 14, 2009 at 10:17 AM EST

Wal-Mart has expanded its $10 toy section due to the recession; Joe Raedle/Getty Images

Overall, U.S. retail sales dropped 1.5 percent in September. According to the Commerce Department, car sales dropped 10.4 percent after the incentives to trade in older vehicles for new, more efficient ones were phased out.

Excluding autos, other retail sales in September were better than analysts expected, rising 0.5 percent. That marks the fourth such increase in five months and is leading some economists to think that a revival of consumer spending has helped the economy begin to grow again.

“There’s solidity, or new strength, in all discretionary spending categories,” said Pierre Ellis, senior economist at Decision Economics in New York, as quoted by Reuters. “We evidently have hit the bedrock level of consumer spending and can even see a little bit of normalcy going forward.”

September’s sales numbers were boosted by back-to-school spending and furniture and home furnishing sales, which were the highest since January 2007.

Economists monitor consumer demand — which makes up 60 to 70 percent of economic activity in the U.S. — to gauge whether it could help the country emerge from a recession. A 9.8 percent national unemployment rate and restricted credit, however, could still stall a speedy recovery.

The gross domestic product, a basic measure of country’s overall economic performance, may be growing in the second half of the year, analysts believe, according to the Associated Press.

Another Commerce Department report found that business inventories dropped 1.5 percent in August, marking the 13th consecutive month of decline and signaling that businesses are still cutting back stocks of unsold goods to match with weak demand.

Inventories factor into changes in the gross domestic product within a business cycle. After a year of inventory cuts that have left shelves emptier, businesses may begin to increase production again, giving a boost to the economy, according to the AP.