Retail sales rose 0.3% in October, the Census Bureau said, topping expectations for a 0.2% rise and offering the prospect of a better-than-expected holiday shopping season. But it was the specific ways the data got better that points the nozzle of credit in the direction of the gas pump.
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The notably big gains came in discretionary spending, in categories that are exactly where you'd look to see a short-term pop when consumers get a little more money in their pockets. Restaurant sales jumped 0.9%, well above the clip of the last year. Sales at online retailers rose 1.9% after a 0.3% decline in September, which had helped cause the stock market's wobbly performance in October.
"Retail sales snapped back in October with a solid performance, indicating a healthy holiday shopping season ahead," said Jack Kleinhenz, chief economist of the National Retail Federation. "A boost from plunging gas prices and accelerating job growth, combined with wage and salary gains and rising stock prices, are making consumers a bit more willing to spend."
Holiday sales should rise between 4% and 4.5%, up from last year's 3.8% growth over 2012, economists at PNC Financial said Friday. "About 1.0-1.5 percentage points will come from higher prices and about 2.5-3.0 percentage points from higher unit sales," Chief Economist Stuart Hoffman wrote in a note to clients.
The upward revision in September sets the stage for a small boost in the consumer spending portion of the gross domestic product estimates, which the Commerce Department will release Nov. 25, said Regions Financial chief economist Richard Moody. Economists are expecting third-quarter GDP to have risen at an annual rate of about 3%, lower than the reported 3.5% estimate announced last month.
The September revision included a big upward adjustment in electronics sales, another component that will respond to lower gas prices, Moody said. The revised numbers also probably include a more accurate assessment of sales of Apple's (AAPL) iPhone 6, which came out that month, he added.
The data point to a better Christmas season for big retailers ranging from Amazon.com to Walmart (WMT) and Home Depot (HD) . But one notable feature of the nearly 75-cents-per-gallon cent drop in gas prices since July has been that earnings from oil companies such as Exxon Mobil (XOM) and Chevron (CVX) have been little affected, as Merrill Lynch strategist Savita Subramanian has argued.
The report Friday shows October car sales rose 0.5%, bouncing back from a dip in September, with growth running slightly ahead of their average for the past year. Clothing and sporting goods sales also accelerated in October, while grocery sales grew more slowly than they had been and furniture store sales rose 0.2%.
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