Retail Sales Jump in October

In October retail sales jumped more than forecast and a big rebound in auto sales is one of the main reasons for this. But broader consumer spending remains under pressure, raising questions about the durability of the recovery.

Last month's jump in sales also followed a dismal September retail performance that was revised even lower by the government, and many analysts remain concerned about consumer demand going forward.

"Against a background of high unemployment, low income growth and tight credit, it seems unlikely that households will be able to spend more freely anytime soon," Paul Dales, U.S. economist at Capital Economics, wrote in a research note.

The Commerce Department said Monday that retail sales rose 1.4 percent last month. Economists surveyed by Thomson Reuters had expected a gain of 1 percent, The Associated Press reports.

It was also reported, the stocks trimmed gains following Bernanke’s comments after reaching a 13-month high earlier in the day. The Standard & Poor’s 500 Index was up 1.3 percent to 1,110.87 at 12:25 p.m. in New York. Shares of retailers including Nordstrom Inc. and Saks rallied.

“Significant economic challenges remain,” Bernanke said in a speech to the Economic Club of New York. “The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible.”

A Commerce Department report today also showed inventories at U.S. businesses fell in September to the lowest level in almost four years, signaling orders will rise in coming months as spending picks up.

The 0.4 percent decrease in stockpiles was smaller than anticipated and brought the value of goods on hand down to $1.3 trillion, the fewest since November 2005. Sales decreased 0.3 percent, reflecting a slump in demand for autos that was reversed last month, Bloomberg reports.

Meanwhile, Lowe's Cos. (LOW) shares were up less than 1%. The No. 2 U.S. home-improvement retailer said it's seen improvement in some of its worst-hit markets including California and Florida despite posting a 30% plunge in its fiscal third-quarter profit with recession-minded consumers holding back on big-ticket purchases.

"The broad-based pressures of the macro environment are clearly evident in our sales as consumers continue to delay large purchases until they feel better about the economic outlook," said Chief Executive Robert Niblock.

Its larger rival Home Depot Inc. (HD) shares rose 1.6%. The Atlanta-based company is expected to report Tuesday profit of 36 cents a share, down from 45 cents a share, according to FactSet.

After retailers led by Wal-Mart Stores Inc. (WMT) reported better-than-expected third-quarter results but gave a fourth-quarter outlook that may fall short of analysts' estimates, investors are waiting for further signals about the health of the industry with the second week of reports from major retailers. In addition to Home Depot, Target Corp. (TGT) and TJX Cos. (TJX) are also scheduled to report on Tuesday. Gap Inc. (GPS), the largest U.S. clothing chain, is expected to release on Thursday, The Wall Street Journal reports.

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