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TheStreet Open House

US Retail Sales Drop 0.3 Percent In October

CHRISTOPHER S. RUGABER

WASHINGTON (AP) â¿¿ Americans cut back on spending at retail businesses in October, an indication that some remain cautious about the economic outlook. Superstorm Sandy also depressed car sales and slowed business in the Northeast at the end of the month.

The Commerce Department said Wednesday that sales dropped 0.3 percent after three months of gains. Auto sales fell 1.5 percent, the most in more than a year.

Excluding the volatile categories of autos, gas and building materials, sales fell 0.1 percent. That followed a 0.9 percent gain in September for that category. Online and catalog purchases fell 1.8 percent, the most in a year. Electronics and clothing stores also posted lower sales.

The government said Sandy "had both positive and negative effects" on sales. Some stores and restaurants closed and lost business. Others reported sales increases ahead of the storm as people bought supplies.

Most economists said they thought the storm overall held back sales. Still, they noted that consumers showed signs of cutting back on spending before the weather disrupted business.

"Looking past (Sandy's) impact, U.S. consumers appeared to dial it back a notch," said Robert Kavcic, an economist at BMO Capital Markets. "There was relatively broad-based weakness in this report."

Paul Dales, senior U.S. economist at Capital Economics, said November will be a crucial test of the consumer. He noted that many could be starting to worry about tax cuts that will expire at the end of the year if Congress and the White House fail to reach a budget deal before then.

"A bounce-back would point to a temporary Sandy-induced softening, while another soft month would suggest that the threat of a sharp fall in after-tax incomes in the new year is worrying households," Dales said.

In September, retail sales jumped 1.3 percent. Spending rose in nearly all categories. The buying spree helped lift economic growth in the July-September quarter and reflected growing consumer confidence. Consumer spending drives nearly 70 percent of economic activity.

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