Thursday, October 16, 2003

Retail sales dip 0.2% in September

By Jeannine Aversa
The Associated Press

The Federal Reserve's synopsis of the economy in the Cleveland district, which includes Cincinnati:

"Business conditions in the Fourth District remained mixed in August and September. Residential construction activity and mortgage-related lending remained at high levels, although some contacts noted a slight deceleration in September. Modest improvements were noted in nondurable manufacturing, some retail categories, trucking and shipping, and commercial lending. Conditions remained steady or weak in durable goods manufacturing, apparel and auto retailing, and commercial construction.

Input prices remained the same or rose during these months. Manufacturers noted sharp increases in energy prices, while builders noted an increase in some of their materials costs. Trucking companies reported that fuel costs had leveled off.

At worst, contacts expect annual economic activity to be the same as in 2002, but many contacts expect higher levels of sales and production."

WASHINGTON - Even as a report Wednesday showed the U.S. economy strengthening, other data showed that America's shoppers took a bit of a breather in September, dropping sales at the nation's retailers by 0.2 percent.

Although the dip in retail sales reported by the Commerce Department Wednesday was the first since April, it came after consumers, aided by President Bush's third tax cut, went on a buying binge in July and August.

Retail sales went up by a strong 1.4 percent in July and then by 1.2 percent in August, according to revised figures. The increase in August's sales turned out to be two times bigger than the 0.6 percent rise that the government first reported a month ago, and the advance in July also was slightly larger than previously estimated.

Separately, the Federal Reserve's survey of business conditions in September and early October found that the economy picked up speed.

"Consumer spending generally strengthened, though most districts report a recent pullback in auto sales," the Fed survey said. Eight of the Fed's 12 regions reported improving sales trends. Those eight regions were: New York, Philadelphia, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco. Retailers, the Fed said, are generally anticipating modest sales gains for the holiday shopping season.

In the monthly retail report, economists were predicting that the brisk performance registered in July and August just couldn't be maintained in September; they had forecast a sales dip of 0.1 percent.

Shoppers in September still had an appetite to spend.

Excluding sales of automobiles, which fell by 1.6 percent in September, sales by all other merchants went up by a modest 0.3 percent.

"I actually think this is a very encouraging report. It certainly doesn't show consumers are pulling back in any material way," Bill Cheney, chief economist at John Hancock Financial Services, said. "It pretty much says that despite all the gloom in the job market, consumers are still spending."

The report showed that in September shoppers also trimmed spending on electronics, sporting goods and home furnishings, but they boosted spending on building materials, clothes, health and beauty products and food.

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