Americans stepped up their spending at retail businesses in September, reflecting higher consumer confidence. The increase was driven by another strong month of auto sales and the release of the iPhone5.
Retail sales rose 1.1 percent last month to a seasonally adjusted $412.9 billion, the Commerce Department said Monday. That followed a 1.2 percent increase in August, which was revised slightly higher. Both were the largest gains since October 2010.
Sales rose last month in most major categories. Electronics and appliances surged 4.5 percent, in part because of iPhone sales. Sales at auto dealers increased 1.3 percent. Building materials and garden supplies, furniture and clothing sales all gained, too.
The retail sales report is closely watched because it is the government's first monthly look at consumer spending, which drives nearly 70 percent of economic activity.
Economists said the September gains should help drive stronger growth in the July-September quarter.
"We expect growth to accelerate in the final quarter of the year and are supported in this view by the strong showing in retail sales," said James Marple, senior economist at TD Economics.
"This shouldn't be considered the start of a consumer revival," cautioned Paul Dales, senior U.S. economist at Capital Economics.
Some of the increase was driven by higher prices. Gas station sales also rose 2.5 percent. And food sales increased 1.2 percent. The recent drought may have driven some food prices higher, economists noted.
Still, excluding autos and gas, sales were up a solid 0.9 percent in September.
High unemployment and weak pay increases have kept consumers from spending more freely this year. That has held back growth. The economy grew at a weak 1.3 percent rate in the April-June quarter. Most economists believe growth will stay around 2 percent for the rest of the year.
Despite weaker growth, consumers grew more confident in September. The Conference Board reported its confidence index rose last month to the highest reading since February.
The job market also looked a little better in September. The unemployment rate dropped to 7.8 percent from 8.1 percent in August. It was the first time the rate has been below 8 percent since January 2009.
And U.S. auto companies reported that sales rose 13 percent in September from a year earlier to nearly 1.2 million. Analysts think sales could hit 14.3 million this year, up from 12.8 million last year. The Federal Reserves' aggressive policies have kept interest rates low, encouraging some Americans to replace aging vehicles.
Sales at building materials and garden supply dealers rose 1.1 percent in September. Sales at furniture stores were up 0.4 percent. Sales at specialty clothing stores rose 0.6 percent. Sales at general merchandise stores, a category that includes big retailers such as Wal-Mart and Target, were up 0.3 percent in September following a 0.3 percent drop in August.
Sales at non-store retailers, the category that covers online shopping, rose 1.8 percent.