NEW YORK, 15 October 2006 — Falling gasoline prices spurred US shoppers last month and consumers’ enthusiasm firmed in October as the drop in fuel costs left them free to spend elsewhere, reports showed on Friday.
Overall retail sales posted a fall of 0.4 percent in September, the Commerce Department said, but when a record 9.3 percent drop in gasoline sales was stripped out, they showed a healthy rise of 0.6 percent, helped by strong clothing and department store purchases.
Meanwhile, the University of Michigan said its index that gauges consumer sentiment jumped to 92.3 in October, higher than the reading of 86.5 economists had predicted in a Reuters poll and up from September’s result. “Happy days are here again,” said Patrick Fearon, senior economist at A.G. Edwards and Sons in St. Louis, Missouri. “Consumers’ improved mood was largely tied to falling gasoline prices.”
Analysts polled by Reuters were expecting a 0.2 percent rise in overall retail sales. US stocks ended higher as the retail sales data helped drive the Dow Jones industrial average to a record high.
US Treasury debt prices slipped and yields rose, as the data reinforced the perception that the Federal Reserve is in no hurry to lower interest rates to stimulate economic growth.
The strength of Friday’s figures was consistent with earlier reports from the retail sector showing growth in consumer spending after a difficult summer when gasoline prices were hovering near record highs. Average gasoline prices slid from a peak of $2.92 a gallon in mid-August to $2.38 a gallon in late September, according to the Energy Department.
SpendingPulse, a retail data service of MasterCard Advisors, an arm of MasterCard Worldwide, said on Monday that Americans felt freer to splurge with the help of lower gasoline prices and a soaring stock market.
In dollar terms, it said September seasonally adjusted sales, excluding autos, reached $287.7 billion, up 5.3 percent from a year ago. This followed reports last week from US department stores and clothing retailers, who posted surprisingly strong September sales.
Shoppers flocked to stores run by Limited Brands Inc., J.C. Penney Co. Inc., Target Corp. and Nordstrom Inc. in a key transition month as retailers wrapped up back-to-school sales and prepared for the vital holiday shopping season. “If September’s sales are any indication, shoppers appear confident heading into the holiday season,” the National Retail Federation said in a statement after the retail sales report.
“As gas prices dipped last month, consumers had more disposable income to spend on other items, especially back-to-school necessities like clothing and sporting goods.”
