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Cheaper gas, hiring lift October retail sales

Economists said the latest figures hint consumer spending could rise by up to 3 percent in the fourth quarter.Matt Rourke/Associated Press

WASHINGTON — US retail sales rose modestly in October, evidence that recent job gains and lower gas prices are lifting consumer spending as the holiday shopping season begins.

The Commerce Department said Friday that retail sales rose 0.3 percent last month after falling by the same amount in September. Excluding gas stations, where falling prices lowered spending, sales rose a solid 0.5 percent.

Employers have stepped up hiring, giving more Americans paychecks to spend and boosting consumer confidence. Stock prices have reached new highs, possibly encouraging more spending by wealthy households. Greater spending could spur more growth because consumer spending makes up about 70 percent of economic activity.


Auto sales rose a solid 0.5 percent, after falling sharply in September. Americans also spent more at restaurants and at sporting goods and health care stores.

Economists said the figures suggest consumer spending could rise by 2.5 percent to 3 percent in the fourth quarter. That would be only a moderate gain, but above the July-September quarter’s 1.8 percent increase.

The report shows a ‘‘boost to consumer spending power and sentiment from plummeting gasoline prices that we anticipate will continue into the key holiday shopping period,’’ said Ted Wieseman, an economist at Morgan Stanley.

Sales at electronics stores plunged after a big gain the previous month, when the newest iPhone went on sale.

The National Retail Federation, a trade group, has forecast that holiday sales will rise 4.1 percent this year, compared with 2013. That would be the biggest gain in three years.

While many categories showed sales gains, there were some signs consumers remain cautious.

The category that includes major department stores and other general retailers reported flat sales last month.

That echoes the largely disappointing sales reports this week from many retail chains, including Macy’s, J.C. Penney, and Kohl’s.

Walmart, however, said that cheaper gas helped boost sales at its stores in the August-October quarter. But it also warned that deep discounting would likely lower profits over the holiday shopping season.


Outside retail chains, sales were mostly healthy. Online and catalog retail sales jumped 1.9 percent, the biggest gain since March. And sales at restaurants and bars rose 0.9 percent, the most since May. Sporting goods stores said their sales climbed 1.2 percent.

The economy and job market have made steady progress for most of this year. Employers have added an average 229,000 jobs a month through October.

That’s put hiring in 2014 on track to be the strongest in 15 years. The unemployment rate has fallen to 5.8 percent, a six-year low, from 7.2 percent 12 months earlier.

Gas prices have dropped for 49 straight days to an average of $2.92 a gallon nationwide, according to AAA. That is the lowest in nearly four years. According to one rough rule of thumb, every one-cent decline in gas prices frees up about $1 billion for consumers to spend on other items.