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News > Economy
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U.S. retail sales soar
graphic November 14, 2001: 11:51 a.m. ET

Retail sales, led by strong auto sales, post record surge in October.
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  • Michigan index rises - Nov. 9, 2001
  • Fed cuts rates again - Nov. 6, 2001
  • Unemployment surges - Nov. 2, 2001
  • GDP shrinks in 3Q - Oct. 31, 2001
  • Consumer confidence drops in October - Oct. 30, 2001
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  • Commerce Department report
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    NEW YORK (CNN/Money) - Retail sales posted the biggest jump on record in the United States last month, the government said Wednesday, as consumers flocked to car dealers offering no-interest loans in a bid to boost business after the Sept. 11 attacks.

    The Commerce Department said retail sales jumped 7.1 percent in October to a seasonally adjusted $306.8 billion, the biggest increase for any month on record, after falling 2.2 percent in September. Economists surveyed by Briefing.com expected sales to rise 2.5 percent.

    Excluding automobile sales, retail sales rose 1.0 percent after falling a revised 1.5 percent in September. Sales of autos and car parts jumped 26.4 percent last month, getting a big boost from zero-percent financing incentives, which many automakers have recently extended.

    To keep consumers spending and fend off a recession, the Federal Reserve has cut its target for short-term interest rates a record-tying 10 times this year and three times since the terror attacks.

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      graphic CNNfn's Kathleen Hays takes a closer look at the record jump in retail sales.

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    On Wall Street, stocks were mixed after an early morning rally faded while bond prices fell as traders bet the strong retail sales number may mean the Fed, the nation's central bank, is through cutting rates.

    "The headline number is absolutely kind of a shock, I think the bond market is probably overreacting," Bill Cheney, chief economist at John Hancock Financial Services, told CNNfn's Before Hours program. "It's a bounce back from September, but we're still not gaining back all the ground lost in September. The underlying trend is still kind of down."

    The vast bulk of the sales gain came from record auto and auto-parts sales, fueled by aggressive dealer incentives, which followed a 4.5-percent drop in auto and parts sales in September.

    Still, some observers noted that consumers' willingness to take advantage of low-financing deals means they may have been more resilient than grim consumer confidence reports indicated.

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    "People told consumer surveys they were miserable, but they were willing to borrow money to pursue a bargain," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd.

    Consumer spending fuels two-thirds of the U.S. gross domestic product (GDP), the broadest measure of the economy. During a long slowdown in business spending this year, consumers have kept a recession, commonly defined as two straight quarters of shrinking GDP, at bay.

    Third-quarter GDP was negative, and many economists expect fourth-quarter GDP to be worse, meaning the technical definition of a recession will be met.

    Wednesday's sales data may raise hopes that consumers will come to the rescue once again and pull fourth-quarter GDP out of the red, especially since their confidence could be buoyed further by the sudden recent advances made in the war in Afghanistan.

    Click here for CNNmoney.com's economic calendar

    But the already swollen unemployment rate is likely to continue to rise even as the economy begins to recover, weakening consumer confidence further.

    "There's no question unemployment is what drives consumer confidence, which in turn drives consumer spending," said Anthony Chan, chief economist at Banc One Investment Advisors. "We have to be realistic and accept the notion that, as we enter the first quarter and December, these sales are going to get a bit weaker. We're still in a recession." graphic

      RELATED STORIES

    Michigan index rises - Nov. 9, 2001

    Fed cuts rates again - Nov. 6, 2001

    Unemployment surges - Nov. 2, 2001

    GDP shrinks in 3Q - Oct. 31, 2001

    Consumer confidence drops in October - Oct. 30, 2001

      RELATED LINKS

    Commerce Department report





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    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

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