CHRISTOPHER S. RUGABERWASHINGTON (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.
The October decline in retail sales may be temporary, economists said. Kavic noted that auto sales may pick up in November as Americans replace cars damaged by the hurricane.Superstorm Sandy hit the East Coast on Oct. 29 and disrupted businesses from North Carolina to Maine. The storm also lowered auto sales last month by about 30,000, according to TrueCar.com. Overall, car sales dipped to an annual pace of 14.3 million in October, down from a 14.9 million pace in September. The storm cut retail spending in the Northeast by about 20 percent last week, according to MasterCard Advisors' SpendingPulse, a retail data service. That figure excludes auto sales. The Northeast accounts for about 24 percent of retail sales nationwide, the MasterCard Advisors' report said. It typically generates $18.7 billion in sales for the week ended Saturday. But sales that week fell to about $15 billion. The storm also cut power to roughly 8 million homes and businesses. Some are still without power. That may have had an impact on online sales. Retail sales are likely to rebound this month, analysts said, because Americans are spending more on repairs and making up for lost shopping trips. The Commerce Department's retail sales report is closely watched because it is the government's first look at consumer spending each month. Hiring has picked up in recent months, which has boosted consumer confidence. Employers added 171,000 jobs in October and job gains in August and September were higher than first estimated. The unemployment rose to 7.9 percent from 7.8 percent as more of those out of work began searching for jobs. A survey by the University of Michigan last week found that consumer sentiment improved for the fourth straight month to its highest level in five years.