Retail sales in the US climbed more than forecast in September, easing concern that unemployment stuck near a 26-year high will bring the recovery to a halt.
Purchases rose 0.6 per cent following a 0.7 per cent gain in August that was larger than previously estimated, according to Commerce Department data issued today in Washington. Other reports showed inflation cooled and manufacturing in the New York region accelerated.
An unexpected decline in consumer confidence was a reminder that a jobless rate forecast to exceed 9 per cent through next year will curb the spending that accounts for 70 per cent of the economy. Federal Reserve Chairman Ben S Bernanke today said the recovery may need additional monetary stimulus because inflation is too low and too many Americans are still out of work.
“Today’s reports are all consistent with Bernanke’s message,” said John Herrmann, senior fixed-income strategist at State Street Global Markets LLC in Boston. “The consumer and the economy are still in need of support, as private job creation is insufficient to cause a material improvement in the unemployment rate and in consumer confidence.”
Stocks rose after fluctuating between gains and losses as expectations for further Fed easing were offset by concerns over financial-company earnings after US regulators said they were aggressively investigating possible falsification of documents used in foreclosure proceedings.
The Standard & Poor’s 500 Index advanced 0.2 per cent to 1,176.19 at the 4 pm close in New York. The yield on the benchmark 10-year Treasury note rose to 2.56 per cent from 2.51 per cent late yesterday on the stronger economic data.
Retail sales were projected to rise 0.4 per cent after a 0.4 per cent gain previously reported for August, according to the median estimate of 80 economists in a Bloomberg News survey.
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A smaller-than-forecast increase in the cost of living highlighted Bernanke’s concerns that inflation is falling short of the Fed’s goals, raising borrowing costs in real terms.
Consumer prices rose 0.1 per cent in September, less than forecast, figures from the Labor Department showed. Core prices, which exclude food and fuel costs, were little changed to cap a 0.8 per cent increase in the past 12 months, the smallest year-over-year gain since 1961.
Target Corp, the second-biggest discount retailer behind Wal-Mart Stores Inc, said last week that it would lower prices on more than 1,000 toys to attract shoppers. Its larger rival responded this week with its own discounts, advertising savings on brands such as Barbie and Nerf toys.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment reported today decreased to 67.9, the lowest since July, from 68.2 in September. Economists had forecast an October reading of 68.9, according to the median estimate in a Bloomberg survey. Retail sales advanced broadly, with clothing stores the only major category to show a decline in demand last month. Sales rose 1.6 per cent at car dealers, their best performance since March and in line with industry figures released earlier this month.
Excluding auto dealers, purchases rose 0.4 per cent, also exceeding the projected 0.3 per cent increase, according to the survey median.
Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales improved 0.4 per cent after a revised 1 per cent gain the prior month that was larger than previously estimated.
Growth forecast
The updated figures prompted economists at Morgan Stanley to raise their forecast for third-quarter economic growth to 2.3 per cent from 1.8 per cent before the report. The economy expanded at a 1.7 per cent annual pace in the second quarter, slowing from 3.7 per cent in the previous three months.
The National Retail Federation is forecasting holiday sales will be the best in four years and companies are planning on stepping up hiring as a result.
Toys “R” Us Inc, based in Wayne, New Jersey, last month said it would hire about 45,000 seasonal employees, doubling its US workforce.