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NEWS

October Retail Sales Top Forecasts (Monday, November 15, 2010)

Big increase in auto sales boosts numbers, other sales match September increase

Retail sales rose 1.2 percent in October, topping analysts' expectations in a hopeful sign for transportation providers.

Overall retail sales rose 1.2 percent from September, well above the median forecast of 0.7 percent by analysts polled by Bloomberg News. The increase was boosted by a 14.7 percent increase in auto sales.

Sales excluding autos and gasoline increased 0.4 percent, matching the September increase.

Consumer spending accounts for 70 percent of total economic activity and is closely watched as a barometer of the overall economy and the transportation sector.

Containerized imports peaked in August and September, earlier than usual, as importers shipped early to avoid the possibility of delays and lost holiday sales. Intermodal rail volumes also have hit annual highs this fall and are close to pre-recession levels.

Although inventories have crept up in recent months, the increase has been gradual and inventories remain tight by historical standards. That means any jump in sales is likely to require restocking that will boost transportation volume.

The National Retail Federation has forecast that retail sales during the November-December holiday selling season will be up 2.3 percent from last year. The International Council of Shopping Centers said its index of sales rose 1.6 percent in October compared to a year ago, the poorest showing since last April.

"This continued momentum is good news for the industry, especially with Black Friday and Cyber Monday quickly approaching," said NRF President and CEO Matthew Shay. "While there is no question that consumer demand has improved, there are still questions about consumer confidence tied to high unemployment. We need to see improvement in key economic indicators to sustain any long-term growth."

"While spending throughout the industry was varied, it appears the fourth quarter has gotten off to a solid start," said NRF Chief Economist Jack Kleinhenz. "October's results are a clear indicator that the economy and consumer spending continue to show marked improvement, even though we expect consumers to proceed with caution."

Many economists expect sales will grow only moderately during the coming months because of continuing concerns about high unemployment, which has remained stuck at 9.6 percent for the past three months, and a sluggish housing market.

A Reuters/University of Michigan survey of consumer confidence last showed an increase of 1.6 points in early November but remained at a depressed level of 69.3.