U.S. retail sales rose by an unexpectedly large 1.5 percent in September, propelled by the sharpest jump in auto sales in nearly three years, according to a government report on Friday that bodes well for economic growth in the third quarter. The overall retail sales increase was the biggest since March. Year-on-year, sales were up 7.7 percent, the Commerce Department said. Wall Street had expected a 0.7 percent climb, following a revised 0.2 percent fall in August that was initially reported as a 0.3 percent decline. Excluding autos, which can swing sharply from month to month, retail sales advanced a solid 0.6 percent after growing 0.2 percent in August. Analysts had expected this measure to edge up by just 0.3 percent. Sales of motor vehicles and parts jumped 4.2 percent, the largest increase since Oct. 2001 when they soared 24.2 percent as car makers offered attractive incentives to tempt buyers in the wake of the Sept. 11 attacks on U.S. cities. Economists scrutinize retail sales as a dominant component in consumer spending, which in turn makes up two-thirds of U.S. economic output and the numbers signal the third quarter ended strong as shoppers shrugged off record oil prices.
A surge in energy costs had crimped output in the second quarter, when growth slowed to 3.3 percent from 4.5 percent in the first quarter. But analysts expect a much stronger performance between July and September as consumption makes a bigger contribution. Building materials purchases also gained, possibly swelled by purchases made by property owners in the southeast United States repairing damage from a string of severe hurricanes that battered the region over the summer. This category, which also includes garden supplies, increased 1.4 percent over August and was up 14.4 percent on a year-on-year basis. Sales at gasoline stations increased a modest 0.1 percent, reflecting the fact that the gasoline price was almost unchanged in the month of September despite crude oil powering to record highs.////