* U.S. retail sales rise 1.1 percent in September
* Consumer sentiment slips unexpectedly in early October
* Sales ex-cars, gas, building supplies up 0.6 percent
* Data suggests stronger Q3 GDP than had been expected
By Jason Lange
WASHINGTON, Oct 14 U.S. retail sales in
September grew at the fastest pace in seven months as consumers
shook off concerns about a weak stock market and political
gridlock, giving a bit more momentum to the economic recovery.
The data, which beat economists' expectations and eased
concerns the U.S. could slip back into recession, overshadowed
a separate report showing a surprise drop in consumer
confidence in early October.
The Commerce Department said on Friday that retail sales
rose 1.1 percent in September, with strong auto purchases
providing a big boost. Sales for August and July were revised
higher as well.
"Reports of the consumer's demise have been greatly
exaggerated," said Stephen Stanley, chief economist at Pierpont
Securities in Stamford, Conn.
U.S. stocks rose on the retail data and on growing optimism
the euro zone would be able to contain its debt crisis. Prices
for U.S. government debt fell as investors took on more risk.
Consumer spending accounts for about two thirds of U.S.
economic activity, and the report suggested the economy had
more vigor over the past three months than earlier believed.
Economists across Wall Street bumped up forecasts, with
Macroeconomic Advisers saying the country's economic output
likely grew at a 2.7 percent annual rate in the third quarter,
six-tenths of a point more than its previous view.
"It looks like third-quarter GDP is going to be better than
the first and second quarter combined," said John Canally, an
investment strategist and economist for LPL Financial in
However, signs the U.S. recovery is strengthening --
growth averaged under a 1 percent pace in the first half of the
year -- have not dispelled recession risks. A slowdown in
Europe, where debt-laden countries are enacting austerity
measures, could still weigh heavily on the United States.
Consumer confidence plunged over the summer as a bruising
battle over the U.S. budget slammed stock prices and pushed the
nation to the brink of default.
After a modest reprieve in September, consumer sentiment
for October sagged to 57.5 in the preliminary Thomson
Reuters/University of Michigan survey for October, with
expectations dropping to its weakest level in more than 30
But September's reasonable spending pace showed the crisis
of confidence might not keep shoppers out of stores.
Indeed, Americans lined up on Friday to buy Apple Inc's latest iPhone as it went on sale.
"Obviously consumers are still willing to go out and shop,"
said Gary Thayer, a strategist at Wells Fargo Advisors in St.
Louis, Missouri. "If the economy takes a clear turn for the
worse we would expect sales to suffer, but at least this time
the shock to confidence has not derailed consumer spending."
Within the retail report, sales of motor vehicles and parts
rose 3.6 percent last month, the biggest gain since March 2010.
Earlier this month, data showed U.S. auto sales rose to an
annual rate of 13.1 million vehicles in September, a five-month
The U.S. economy took a hit earlier in the year from a
spike in gasoline prices and a March earthquake in Japan that
clogged global supply conduits, hurting auto output and sales.
While car sales are now bouncing back, even excluding
autos, retail sales increased 0.6 percent in September, above
forecasts for a 0.3 percent gain.
Separate reports on Friday showed higher growth in business
inventories during August -- which also helps growth -- as well
as an unexpected rise in import prices in September.