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US shopping boom sparks recovery hopes

"There was some fear given the plunge in October auto sales that the American consumer was collapsing under the weight of rising debt loads and weak jobs growth. This report goes some ways to alleviating our concerns about the health of the consumer."

Sal Guatieri, a Chicago-based economist at the Bank of Montreal

Relentless US shoppers packed the malls in October in a scramble for winter clothes, government figures showed Thursday, sparking new hope for a recovery.

Retail sales, which had been expected to tumble as automobile manufacturers reported a slump in car sales, held steady in the month as the clothes-buying spree began.

"Don't count the consumer out yet," said Naroff Economic Advisors chief economist Joel Naroff. "There still seems to be a little bounce in the mall walk."

Flat retail sales in October were not the real story, he said, since the drop in vehicle sales had already been expected.

People deserted car showrooms, which had been packed for months as automobile manufacturers offered zero-percent interest financing to move cars out of their lots.

Auto sales dropped 1.9 percent after slumping 5.0 percent in September.

Excluding auto sales, however, retail sales climbed 0.7 percent in October, the steepest rise in six months.

Sales in clothing stores shot up 4 percent in October, the sharpest climb this year, as cold weather spurred buying. Gasoline sales rose 1.5 percent. Department stores reported a 1.1-percent gain in sales.

"The strength in ex-autos was quite broadly based and suggests that the American consumer is alive and well," said Sal Guatieri, Chicago-based economist at Bank of Montreal.

"There was some fear given the plunge in October auto sales that the American consumer was collapsing under the weight of rising debt loads and weak jobs growth," he said.

"This report goes some ways to alleviating our concerns about the health of the consumer," he added.

Wall Street advanced as investors greeted the figures.

The Dow Jones industrials average of 30 top stocks rose 143.64 points, or 1.71 percent, to close at 8,542.13.

The retail sales data indicated slow but still-growing personal consumption in the October-December quarter, Guatieri said, anchoring his forecast for annual economic growth of about 1.5 percent in the same period.

Latest jobs data also kept hopes alive.

The number of people making new claims for US unemployment benefits dropped 8,000 to a seasonally adjusted 388,000 last week, the Labor Department said.

Wall Street economists had been expecting a small increase in unemployment claims.

"The improvement in jobless claims as well helped alleviate concerns about the health of the American consumer," Guatieri said.

"We definitely need to see a pick-up in jobs growth to sustain consumer spending at health rates and this report at least moves in that direction," he said.

US Federal Reserve chairman Alan Greenspan, who last week joined with his colleagues in slashing key interest rates by half a percentage point, said Wednesday the economy had hit a "soft patch."

"There is no evidence here that the economy's soft patch has gotten softer," said a report by Bear Stearns economists.

"We continue to stick to our forecasts of 2.0 to 2.25 percent real GDP [gross domestic product] growth in the fourth quarter."
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