Nov. 16 (Bloomberg) -- Retail sales in the U.S. rebounded more than forecast as demand for autos climbed, and a regional gauge of manufacturing showed expansion for a fourth month, easing concern the recovery will cool after government incentives end.
Purchases increased 1.4 percent in October after a 2.3 percent drop in September that was larger than the previously estimated, Commerce Department figures showed today in Washington. The Federal Reserve Bank of New York’s general economic index, where positive readings signal growth, fell to 23.5 this month from a five-year high of 34.6 in October.
Stocks added to a global rally after the reports signaled rising demand at retailers from discount chain TJX Cos. to luxury store Saks Inc. may foreshadow a better holiday shopping season, while General Motors Co. said demand is holding up this month. Fed Chairman Ben S. Bernanke today said “headwinds” of reduced credit and a weak labor market will probably restrain the recovery.
“Consumers are looking relatively resilient,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York, who projected sales would increase 1.3 percent. “They are spending a little more freely, which bodes well for the holiday season. Given the backdrop of the labor market, this is actually as good as one can hope for.”
Stocks Rise
Benchmark stock indexes reached 13-month highs, led by energy producers as crude oil prices climbed. The Standard & Poor’s 500 Index rose 1.5 percent to close at 1,109.3. Shares of retailers including Nordstrom Inc. and Saks rallied.
“Significant economic challenges remain,” Bernanke said in a speech to the Economic Club of New York. “The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible.”
A Commerce Department report today also showed inventories at U.S. businesses fell in September to the lowest level in almost four years, signaling orders will rise in coming months as spending picks up.
The 0.4 percent decrease in stockpiles was smaller than anticipated and brought the value of goods on hand down to $1.3 trillion, the fewest since November 2005. Sales decreased 0.3 percent, reflecting a slump in demand for autos that was reversed last month.
Forecast, Revision
Retail sales were projected to rise 0.9 percent after an originally reported 1.5 percent decline in September, according to the median estimate of 66 economists in a Bloomberg News survey. Forecasts ranged from gains of 0.4 percent to 1.8 percent.
Excluding autos, sales increased 0.2 percent, less than anticipated, after a 0.4 percent gain in September.
Sales at automobile dealerships and parts stores jumped 7.4 percent in October after a 14 percent plunge the prior month that was larger than previously estimated.
Auto demand is stabilizing after plunging to a three- decade low earlier this year. GM and Ford Motor Co. last month had their first combined sales gain in three years, helping the industry rebound from a plunge in September. Overall sales climbed to a 10.5 million annual rate from 9.2 million.
Fritz Henderson, GM’s chief executive officer, said in a Bloomberg Television interview today that November’s sales pace will be about the same as last month’s.
Broad-Based Gains
Car dealers aren’t the only retailers to see improvement. Sales climbed at clothing, department and health and personal care stores, along with Internet retailers and restaurants, today’s report showed. Furniture, electronic and building supply stores all showed declines, signaling the rebound in housing will be slow to develop.
Sales at stores open at least a year climbed last month from a year earlier at Framingham, Massachusetts-based TJX, owner of T.J. Maxx and Marshalls stores that sell designer goods at discounted prices. Luxury chains Saks and Nordstrom also showed gains, helping the retail industry report its biggest same-store sales increase since July 2008.
Wal-Mart Stores Inc., the world’s largest retailer, raised its annual profit forecast while predicting U.S. sales may be little changed this quarter. Bentonville, Arkansas-based Walmart plans to cut prices weekly, and offer discounts on items such as flat-panel televisions to win holiday shoppers.
“While the economy remains challenging for our customers and therefore for Walmart sales, I continue to be encouraged by both our traffic and market-share gains,” Chief Executive Officer Mike Duke said on a pre-recorded conference call last week.
Exports, Inventories
Exports that have increased five straight months, a weaker dollar and lean inventories have combined to keep factories busy. Economic growth will be stronger over coming quarters than previously anticipated reflecting the pickup in manufacturing, according to a Bloomberg survey of economists taken Nov. 2 to Nov. 9.
Consumer spending will be slower to rebound as unemployment exceeds 10 percent through the first half of 2010, economists surveyed projected.
Payrolls fell by 190,000 in October and the jobless rate jumped to 10.2 percent, topping 10 percent for the first time since 1983. Concern about jobs and incomes pushed consumer sentiment down to a three-month low in November, according to a report from Reuters/University of Michigan last week.
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