Retail sales beating forecasts support U.S. growth

Americans snapped up goods from cars to iPhones in September at a faster pace than forecast by economists, showing consumer demand was heading into the year- end holidays on a high note.

The 1.1% advance followed a revised 1.2% increase in August, the best back-to-back showing since late 2010, Commerce Department figures showed today (Oct. 15) in Washington. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8% rise.

“This keeps the economic expansion moving forward,” said Dean Maki, New York-based chief U.S. economist at Barclays Plc. “Consumer spending is continuing to grow solidly.”

Gains were broad-based, with 12 of 13 retail categories showing an improvement, as shoppers were heartened by higher stock prices and home values. Faster payroll growth would further boost the consumer spending that’s needed to offset a slowdown in business investment, Maki said.

Maki raised his tracking estimate of third-quarter consumer spending to 2.1% from 1.8%, and for gross domestic product to 2% from 1.8% after the report.

Shares climbed as the retail sales report and earnings from Citigroup Inc. overshadowed a slump in commodity prices. The Standard & Poor’s 500 Index rose 0.8% to 1,440.13 at the close in New York.

Other reports today showed that inventories in the U.S. rose at a slower pace in August, indicating that unexpected strength in sales may be starting to drain stockpiles, and manufacturing in the New York region contracted in October for a third straight month.

Economists’ estimates for retail sales in the Bloomberg survey ranged from gains of 0.3% to 1.3%. The reading for August was revised from an initially reported increase of 0.9%.

Sales climbed 1.3% at automobile dealers, after a 1.8% increase the prior month, today’s report showed. The results are in sync with industry figures issued earlier this month.

Cars and light trucks sold at a 14.9 million annual pace in September, the most since March 2008, according to Ward’s Automotive Group. Chrysler Group LLC and General Motors Co. reported gains.

Retail sales excluding autos increased 1.1%, the most since January, today’s report showed. They were projected to rise 0.7%, according to the Bloomberg survey median.

Electronics dealers showed a 4.5% jump in sales, the biggest gain since October 2011. Apple’s iPhone 5 became available on Sept. 21 in the U.S. and more than 5 million units sold in the first three days, surpassing a record set last year by the previous model. Demand for the new handset exceeded the initial supply, the Cupertino, Calif.-based company said.

Non-store retailers, which include online merchants, may have also benefited from demand for the new device, leading to a 1.8% gain in receipts.

The gains in spending didn’t stop there as clothing stores racked up a 0.6% increase in receipts last month, today’s report showed.

Retailers may have benefited from a last-minute rush for back-to-school items, with September same-store sales topping analysts’ estimates at discount and specialty-apparel chains. Target Corp., the second-biggest U.S. discounter, had a 2.1% gain from a year earlier, and TJX Cos., the owner of T.J. Maxx and Marshalls, reported a 6% increase.

Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales climbed 0.9%, the best performance since July, after a 0.1% gain the previous month.

There is “some resilience on the part of the consumer,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, who projected a 1% increase in sales. “We are going to continue to see slow, but steady, growth.”

Household purchases may have grown at a 1.9% annual rate in the third quarter after a 1.5% gain in the prior three months, according to the median forecast in a separate Bloomberg survey of economists taken from Oct. 5 to Oct. 10. Spending will rise 2.1% this quarter, the survey showed.

Companies in the U.S. boosted inventories by 0.6% in August following a 0.8% gain the prior month, Commerce Department data also showed today. Sales at factories, wholesalers and retailers climbed 0.5%  after advancing 0.9% the prior month.

The Federal Reserve Bank of New York’s Empire State index rose to minus 6.2 this month from minus 10.4 in September, which was the lowest since April 2009.