US retail sales rise in October

US retail sales rose broadly in October and a gauge of New York state manufacturing showed growth this month for the first time since May, suggesting the economy started the fourth quarter with vigour.

Another report showed wholesale prices fell during October as petrol prices dropped, signalling a cooling of fuel-driven inflation pressures that have hit consumers' pockets.

"This is more than enough to keep the economy going," said said Eric Green, chief US economist at TD Securities in New York.

The US economy appears to be gaining strength following a dicey summer where a political battle over the national debt damaged confidence and Japan's March earthquake disaster rippled through the country's factories.

But it is by no measure out of the woods. Europe's snowballing debt crisis looks likely to push the United States back into recession early next year, research from the San Francisco Federal Reserve Bank showed yesterday, although many economists' predictions are less dire.

"The economy is showing some resilience at this point which is encouraging," said Sean Incremona, and economist at 4CAST in New York. "But we really want to see this sustained and there are a lot of risks to the outlook that could easily bump us off again."

Total retail sales increased 0.5 per cent last month, the Commerce Department said on Tuesday. That was a more modest gain than September's reading but above economists' expectations.

Separately, the New York Fed's "Empire State" general business conditions index rose to 0.61, its strongest reading since May, from minus 8.48 the month before. Economists polled by Reuters had expected a negative reading.

With signs of strength from consumers and factories, economic growth during the fourth quarter might even exceed the 2.5 per cent annual rate clocked during the previous three-month period, Barclays Capital said in a report.

US stocks rose despite fears over the European crisis, while government debt prices pared gains on the US data. The dollar held gains against the euro.

In the 12 months to October, retail sales were up 7.2 per cent. While October's retail sales report showed broad gains, weak income growth remains a constraint.

Consumer spending - which accounts for more than two-thirds of US economic activity - rose at its fastest pace in nearly a year in the third quarter. But households are significantly cutting back on saving to fund their spending.

Wal-Mart Stores chief executive Mike Duke said the retail giant's US customers were still worried about jobs and only one in 10 mothers taking part in its surveys view the economy as "good".

With food prices rising faster than most wages, some shoppers were concerned about holiday meals, the company said.

Retail sales last month rose as receipts from motor vehicle dealers increased 0.4 per cent, adding to the prior month's 4.2 per cent gain.

Excluding autos, retail sales rose 0.6 per cent, the largest increase in seven months, after advancing 0.5 per cent in September.

Sales at food and beverage stores increased 1.1 per cent, while receipts at sporting goods, hobby, book and music stores gained 1.3 per cent. Sales of electronics and appliances soared 3.7 per cent, while receipts from building material retailers increased 1.5 per cent.

But clothing store sales fell 0.7 per cent last month, the largest decline since December 2010, while furniture sales declined 0.7 per cent.

Reuters