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Retail sales jump 1.2% in October

By Hibah Yousuf, staff reporter

NEW YORK (CNNMoney.com) -- Retail sales rose for a fourth straight month in October, the government reported Monday, signaling that consumers are keeping their wallets open as the holiday shopping period approaches.

Total retail sales increased 1.2% from the previous month to $373.1 billion, compared with September's upwardly revised 0.7% advance, the Commerce Department said. It was the largest gain since March, when sales spiked more than 2%.

Economists surveyed by Briefing.com were expecting October sales to rise 0.7%. Sales were up 7.3% from a year earlier.

Consumer spending accounts for two-thirds of U.S. economic activity, so retail sales and related reports are closely monitored to gauge the health of the economy.

"October's U.S. retail sales are a fairly encouraging sign that consumption growth may be starting to gain some traction," said economist Paul Dales of Capital Economics.

The better-than-expected rise was led by a lift in autos. Motor vehicle and parts sales climbed 5% during the month.

Dales said that the gain is much larger than expectations based on sales figures from car manufacturers. He said it is possible that the expiration of the Cash for Clunkers program at this time last year "messed up" the government's seasonal adjustment process and pumped up auto sales figures in last month's report.

Sales excluding cars and auto parts rose 0.4% last month, in line with economists' forecasts, which Dales said is "still healthy enough."

Strength in sales of building materials and gardening equipment also contributed to the sales boost last month, rising 1.9%.

While sales ticked higher in most categories, purchases fell at stores selling furniture, electronics and appliances, and health and personal care items. Sales were also weak at department stores and miscellaneous store retailers, the report said.

Dales said that the government's data suggests that the recent surge in commodity prices has yet to hit household spending power with higher gasoline and food prices, which rose only modestly.

But as the higher prices translate, Dales warned that "it still looks as though consumption will be unable to shift the economic recovery into a higher gear."

All eyes will remain on the retail sector this week, as a number of companies release third-quarter financial results and issue their forecasts for the period that includes the holiday season.

Discount giants including Wal-Mart (WMT, Fortune 500) and Target (TGT, Fortune 500) are due to report, as well as higher-end department stores including Nordstrom (JWN, Fortune 500) and Saks Incorporated (SKS).  To top of page

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