WASHINGTON – A surge in auto purchases helped lift retail sales in October by the largest amount in seven months. But excluding autos, retail sales rose a more modest 0.4 percent.

October marked the fourth straight increase in retail sales after declines in May and June, which had raised fears about the recovery. Still, economists say consumers probably aren’t spending enough to lift sales growth above the lackluster pace of the past six months.

Consumers are still struggling with scant income gains, high debt and high unemployment, which remains stuck at 9.6 percent even though the recession ended more than a year ago.

Paul Dales, U.S. economist at Capital Economics, interpreted October’s retail sales as a sign that consumption growth is improving. He cautioned that spending remains too tepid to drive economic growth higher in the current quarter. Consumer spending accounts for 70 percent of U.S. economic activity.

Overall retail sales rose 1.2 percent in October, the Commerce Department said Monday. That was nearly double the gain that had been expected and the largest increase since March.

A second government report said inventories held by businesses grew 0.9 percent in September, the ninth straight monthly gain. Total business sales rose 0.5 percent, the best showing since July.

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Steadily higher inventories and sales are seen as signs that the recovery will continue. Inventory rebuilding has provided support for the economy.

For October, sales at auto dealerships rose 5 percent. That increase was the best monthly showing since the federal Cash for Clunkers program sent sales surging in August 2009.

Outside of autos, sales at general merchandise stores, including department stores and big chains such as Wal-Mart Stores Inc., rose 0.2 percent in October after a slight 0.1 percent rise in September. Sales at specialty clothing stores fared better: They rose 0.7 percent after having fallen 0.4 percent in September.

The nation’s big retailers had reported lackluster sales in October. Analysts ascribed some of the blame to an unusually warm October that lured shoppers to other activities. The International Council of Shopping Centers said its index of sales turned in its poorest showing in October since last April.

Still, some analysts noted that many higher-income consumers are spending freely. Upscale chain Nordstrom Inc., for instance, on Monday reported a 43 percent rise in third-quarter net income and raised its earnings outlook.

“The wealthy are back and willing to spend conspicuously, while the majority of households continue to stick to necessities and shop for deals,” Diane Swonk, chief economist at Mesirow Financial, wrote in a research note.

 


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