Two reports released Thursday offered some encouraging signs for the economy, with retail sales outside of the auto sector rising more than expected and fewer Americans seeking jobless benefits.
The Commerce Department said retail sales, which make up about 40 percent of total consumer spending, were flat in October, at a seasonally adjusted $301.7 billion.
But when a 1.9 percent drop in auto sales is stripped out, retail sales shot up an unexpected 0.7 percent, the biggest gain in six months.
“Don’t count the consumer out yet,” said economist Joel Naroff of Naroff Economic Advisors.
“I think the retail sales figures suggest that this won’t be an awful holiday season for retailers after all,” said Bill Cheney, chief economist at John Hancock. “Given the state of the economy, it probably won’t be fantastic.”
Even though sales were flat, that still beat economists’ forecasts of a 0.2 percent decline and followed a 1.3 percent plunge in September. Excluding autos, sales were expected to rise by 0.3 percent.
“It still shows that consumers are holding up their end of the economy,” said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis. “We did see some softness in the auto component, but retail sales excluding autos were healthier than anticipated.”
Sales at clothing stores jumped by 4 percent, the biggest increase since December 2001. Sales rose 1.1 percent at general merchandise stores, including department stores, and 0.5 percent at building and garden supply stores. Sales of health and beauty products increased 0.4 percent.
Furniture and home furnishing sales dipped 0.1 percent for the second month in a row, and sales at bars and restaurants slid 0.8 percent.
In the second report, the Labor Department said jobless claims fell by 8,000 last week, to a seasonally adjusted 388,000, the lowest level since Aug. 3 and lower than economists’ projections of 395,000. It was the second week in a row the figure has fallen.
The more reliable four-week moving average of claims also fell, to 396,750, breaking a 10-week run above the 400,000 mark, a level economists associate with a lackluster labor market.
“The jobless claims data is not insignificant. This plays into the view that, yes, we’re in a soft spot, but perhaps we’ve seen the worst of it,” said Alan Ruskin, research director at 4Cast Ltd. in New York.
But the number of people continuing to draw benefits rose to 3.65 million for the week ended Nov. 2, and some economists expressed lingering concern about future prospects for consumer spending, one of the few bright spots during the sluggish economic recovery.
“[Federal Reserve Chairman Alan] Greenspan is looking for some news that the `soft spot’ is being put behind us,” said Naroff. “This is one indication that it could be happening. But with Iraq and terror threats high up in consumers’ minds, nothing can be assumed at this point.”
