US Retail sales fall; inventories rise

Retail sales across the country rose by a healthy 0.6 percent last month, aside from a substantial plunge in gas prices. A 9.3 percent drop in sales figures from service stations caused the overall retail sales number to fall by 0.4 percent, the Commerce Department reported Friday. The 9.3 percent slide was the biggest-ever drop in that category. Prices at the gasoline pump plummeted 13 percent during the month. In other economic news, inventories held by businesses on shelves and backlots rose by 0.6 percent in August as total sales by manufacturers, wholesalers and retailers rose by 0.8 percent. Economists are looking for inventories to grow at a more modest rate in the last half of the year as the auto industry continues to work down a backlog of unsold cars. That slowdown in inventory building is expected to trim overall economic growth by about 0.6 percentage point in the July-September quarter. Consumer spending slowed sharply earlier this year as Americans were battered by gasoline prices topping $3 per gallon, high interest rates and a cooling housing market. This slowdown trimmed overall economic growth to a rate of just 2.6 percent in the spring. Many economists had worried that if the housing slowdown became severe enough it could push the country into a full-blown recession. However, those fears have eased in recent weeks as prices at gasoline pumps have fallen significantly, putting consumers in a mood to spend on other items. "Given the improvement in the array of consumer confidence measures of late, along with continued lower energy prices, consumer spending should remain decent during the critical holiday shopping season," said Michael Gregory, senior economist at BMO Capital Markets. Still, economists believe that the economy, weighed down by continued declines in housing and a record trade deficit, will grow at a sluggish rate of 2 percent to 2.5 percent in the last half of this year. For September, sales jumped 1.1 percent at department stores and were up an even larger 3 percent at specialty clothing stores, the biggest increase in this category in 11 months. The big gains in clothing sales last month have given retailers hope that they will be able to close out the year with a good holiday shopping season. Auto sales were flat in September following a 0.4 percent drop in August. The nation's automakers have struggled this year with a glut of sport utility vehicles and other gas-guzzling cars. Excluding auto sales, retail sales were down 0.5 percent, reflecting the big drop in the amount drivers were spending at service stations. Sales increased by moderate amounts at furniture stores, hardware stores, sporting goods stores and restaurants and bars. Sales fell at grocery stores. The various changes left retail sales at a seasonally adjusted $366.2 billion in September, down from $367.7 billion in August.