Retail sales drop after incentives end

U.S. retail sales declined in September by the largest amount this year as car sales plummeted following the end of the government’s popular “Cash for Clunkers” rebate program. But outside of autos, sales were better than expected.

WASHINGTON — U.S. retail sales declined in September by the largest amount this year as car sales plummeted following the end of the government’s popular “Cash for Clunkers” rebate program. But outside of autos, sales were better than expected.

The Commerce Department said Wednesday that retail sales dropped 1.5 per cent last month. That’s smaller than the 2.1 per cent fall economists had expected, but still the biggest setback since sales dropped 3.2 per cent in December.

Car sales plunged 10.4 per cent, but excluding autos, retail sales rose 0.5 per cent. That’s better than the 0.2 per cent increase analysts expected.

Consumer demand, which accounts for 70 per cent of total economic activity, is being watched closely by economists who worry that any recovery from the recession could stall due to the strong headwinds that households still face.

“The increase in sales excluding autos is still fairly modest by normal standards,” Paul Dales, an economist at Capital Economics, wrote in a research note.

“Moreover, with households’ finances likely to remain constrained by falling employment, declining real incomes and tight credit, we doubt that consumption will continue to growth at such rates.”

But on Wall Street, the better-than-expected retail sales figures and surprisingly strong earnings reports from Intel Corp. and JPMorgan Chase&Co. pushed the Dow Jones industrials about 45 points away from the 10,000 mark, a level not seen in a year.

Major stock indexes all rose about one per cent in early trading.