U.S. retail sales rose more than expected in October as strong receipts from motor vehicle and building material dealers offset the drag from service stations, suggesting the economy started the fourth quarter with some vigour.
Total retail sales increased 0.5 percent, the Commerce Department said on Tuesday, after rising by an unrevised 1.1 percent in September. Economists polled by Reuters had forecast retail sales climbing 0.3 percent last month. In the 12 months to October, retail sales were up 7.2 percent.
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 U.S. 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.
Retail sales last month rose as receipts from motor vehicle dealers increased 0.4 percent, adding to the prior month's 4.2 percent gain. Excluding autos, retail sales rose 0.6 percent, the largest increase in seven months, after advancing 0.5 percent in September.
Sales at food and beverage stores increased 1.1 percent, while receipts at sporting goods, hobby, book and music stores gained 1.3 percent. Sales of electronics and appliances soared 3.7 percent, while receipts from building material retailers increased 1.5 percent.
But clothing store sales fell 0.7 percent last month, the largest decline since December 2010, while furniture sales declined 0.7 percent.
Receipts at gasoline stations fell 0.4 percent last month after rising 0.7 percent. The decline reflects weak gasoline prices. According to the U.S. Energy Information Administration, gasoline prices fell 4.39 percent or 16 cents to $3.506 a gallon in October. Excluding gasoline, retail sales rose 0.7 percent.
Weak gasoline prices, combined with subsiding inflation pressures should ease the burden on stretched household budgets and support holiday shopping.
Core retail sales, which exclude autos, gasoline and building materials, rose 0.7 percent in October after advancing0.5 percent the prior month.
Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)