Retail sales point to subdued holidays

WASHINGTON – Improved retail sales gave Wall Street a boost Monday but provided little hope for a robust holiday shopping season that might invigorate the economic recovery.

The October figures, driven by a surge in auto sales, exceeded economists’ expectations. Yet consumers are so squeezed by tight credit and rising unemployment that economists don’t expect to see significant spending until well after year’s end. Even optimists predict scant improvement over last year’s holiday season.

Consumer spending accounts for about 70 percent of total economic activity, so wary shoppers are a worrisome sign for retailers entering the crucial holiday season.

“U.S. consumers are no longer panicked, but they remain cautious,” said Mark Zandi, chief economist at Moody’s Economy.com. “They are spending just enough to keep the economy out of recession, but not enough to fuel a self-sustained expansion.”

Retail sales rose 1.4 percent last month, the Commerce Department said. But excluding a big rebound in auto sales, the gain was just 0.2 percent. Strength at general merchandise stores such as Wal-Mart and Target was offset by sales declines at furniture stores, appliance stores and hardware stores.

Zandi said one telling statistic about household finances was that the number of bank credit cards in circulation had fallen 18 percent since the year began. That’s happened as banks facing soaring loan losses have tightened credit standards.

Consumer credit has fallen for a record eight consecutive months through September and households are struggling to manage their debt levels after the most severe recession since the 1930s.

Federal Reserve Chairman Ben Bernanke warned Monday of “important headwinds,” such as the weak job market and tight credit conditions. These forces “likely will prevent the expansion from being as robust as we would hope,” he told the Economic Club of New York.