WASHINGTON - U.S. retail sales rebounded in October as vehicle purchases rose even without support from government incentives, a Reuters survey predicted, which could allay some fears over the strength of the economy's recovery.
Sales excluding autos are expected to have risen for a fourth straight month and support the view that consumer spending, which normally accounts for about 70 percent of U.S. economic activity, was on the mend.
The survey of 69 economists forecast overall retail sales rose 0.9 percent last month after dropping 1.5 percent in September. The Commerce Department is due to release the October retail sales report on Monday.
Sales were seen boosted by a bounce in new vehicle sales, which had tumbled in September following the expiration of the government's popular cash for clunkers program.
The program, which ended in August, gave discounts for some new vehicle purchases and contributed hugely to the economy's brisk 3.5 percent annualized growth pace in the third quarter. The resumption of growth probably ended the worst U.S. recession since the 1930s.
Following the success of cash for clunkers, many auto dealers retained incentive programs for citizens to purchase autos. This will underscore a very solid increase in retail sales, said Joseph Brusuelas, an economist at Moody's Economy.com in West Chester, Pennsylvania.
U.S. auto sales hit an annualized rate of 10.46 million units in October, according to industry tracking firm Autodata. That was a level not seen in a year, except for July and August when the cash for clunkers incentives buoyed sales.
With government stimulus largely behind the economy's return to growth in the July-September period after four straight quarters of declines, and unemployment still rising, there concerns that the recovery pace could be sluggish.
Analysts are hoping that October's retail sales report could help to ease some of those worries.
Excluding autos, retail sales are expected to have risen 0.4 percent, building on September's 0.5 percent increase, and notching a fourth month of consecutive gains. Sales were seen supported by rising purchases of clothing, health and personal care, and general merchandise.
Analysts said an increase in non-auto sales would be a confidence boost for the equities market and probably curb flows into the traditional safe havens of U.S. government bonds and the dollar.
The (equity) market is very skeptical still about the recovery. They think it was all cash for clunkers, said John Canally, an economist and investment strategist at LPL Financial in Boston.
Anything that will show that we're getting consumer spending growth month-over-month is just a reminder to the skeptics in the market place that the economic recovery is sustainable. (Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)