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Except for autos, Sept. retail sales were stronger than expected

Martin Crutsinger
AP Economics Writer

Washington — Retail sales declined in September by the largest amount this year as car sales plummeted following the end of the government’s popular Cash for Clunkers program. But outside of autos, sales were better than expected.

According to the Commerce Department, retail sales dropped 1.5 percent last month. That’s smaller than the 2.1 percent fall economists had expected, but still the biggest setback since sales dropped 3.2 percent in December.

Car sales plunged 10.4 percent, but excluding autos, retail sales rose 0.5 percent. That’s better than the 0.2 percent increase analysts expected.

Consumer demand, which accounts for 70 percent of total economic activity, is being watched closely by economists who worry that any recovery from the recession could stall because of the strong head winds that households still face.

“The increase in sales excluding autos is still fairly modest by normal standards,” according to a research note attributed to Paul Dales, an economist at Capital Economics. “Moreover, with households’ finances likely to remain constrained by falling employment, declining real incomes and tight credit, we doubt that consumption will continue to growth at such rates.”

Analysts had expected increases at general merchandise stores following reports last week from the nationwide retailers that sales grew in September at stores open at least a year compared with activity in September 2008. It marked the first year-over-year rise in sales after a year of declines, according to data from the International Council of Shopping Centers and Goldman Sachs.

Shoppers are hungry for markdowns, looking for sales signs at stores, while cashing in on a tax credit for first-time homebuyers and low mortgage rates and home prices. A late Labor Day and delayed school openings also helped retailers last month because consumers purchased some items in September that they would normally have bought in August.

Kohl’s Corp. department store chain, Limited Brands Inc., which runs Victoria’s Secret and Bath & Body Works, and accessories chain The Buckle Inc. all experienced higher September sales at stores open more than a year, according to the companies.

Same-store sales fell at J.C. Penney Co., Cincinnati-based Macy’s Inc. and Target Corp., but not as much as expected, according to the companies.

Also Wednesday, Commerce Department officials reported that businesses slashed their inventories 1.5 percent in August, the 13th straight decline and more than the 0.9 percent fall analysts had expected. Still, many economists say businesses soon may begin restocking depleted store shelves after more than a year of cuts. If that occurs, factory production will begin to rise and help bolster a broad recovery from the worst recession since the 1930s.

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