Flooring News and Information

Washington, DC, Nov. 14—Drawn by favorable financing and heavy discounting, consumers boosted retail sales in October by 7.1%, the biggest one month gain ever recorded since the government began keeping records in 1992. The huge increase came after consumer spending plunged in September, pushing sales down by 2.2%, according to the Commerce Department.

Much of the gain in the October retail report came from a record 26.4% increase in car sales, which have been boosted by zero percent financing and other incentives.

In an effort to prevent the economy from sinking deeper into recession, the Federal Reserve has cut interest rates ten times this year, with three of the reductions coming after the September 11 attacks.

Congress, meanwhile, is working on a plan to stimulate the economy through new tax cuts and increased government spending.

Commerce Secretary Don Evans, in an interview, called October's retail sales report encouraging. “It’s a sign people are going to malls, shopping and participating in this economy,” Evans said. “But we still have a long way to go.”

The economy is very weak, emphasizing the need for Congress to quickly pass a balanced plan to revive it. The economy shrank at a 0.4% rate in the third quarter and many economists are predicting an even bigger drop in the current quarter, thus meeting a common definition of a recession: two consecutive quarters of declining economic output.

With unemployment rising and fears about anthrax in the mail and further terror attacks, economists worry that consumers might pull back, making the economy even weaker. Still, they’re hopeful that the Fed's rate cuts along with the economic stimulus being contemplated by Congress will lead to a rebound next year.

To revive sagging sales, retailers have heavily discounted merchandise and offered other incentives. Car makers and dealers have provided free financing, which was a big factor in soaring car sales last month.

The 26.4% jump in car sales in October followed a 4.5% decline in September. Excluding car sales, overall retail sales in October rose by 1%. Sales at clothing stores increased by 6.9%, erasing a 5.9% drop in September. At building and garden supply stores, sales rose by 2.8% in October, after falling by 2.6%. At health and beauty stores, sales went up by 1.7%, after a 0.3% rise. Sales of sporting goods, books and music rose by 3% in October, following a 2.2% decline. Sales of electronics and appliances rose by 0.7%, after a 1.4% drop. Bar and restaurant sales grew by 1.4%, a month after falling 2.5%.

Sales at furniture and home furnishing stores, however, declined by 0.5%, after an even bigger 4.2% decrease in September. Sales at gasoline stations fell by 6.4%, reflecting lower prices at the pump, following a 2.8% increase.

The 7.1% increase in total retail sales in October was the largest since the government began keeping retail sales records under the current classification system in 1992.