Americans kept spending before government shutdown

Sales at most types of retailers, from electronics stores to restaurants, climbed in September, indicating households were sustaining the U.S. economic expansion before the government shutdown shook confidence.

Purchases excluding auto dealers rose 0.4% following a 0.1% gain the prior month, matching the median forecast of economists surveyed by Bloomberg, Commerce Department figures showed today in Washington. Total sales dropped 0.1% because car purchases over the Labor Day holiday weekend were counted in the figures for August.

Americans snapped up the newest mobile phones and video games in October, buoyed by low borrowing costs and rising household wealth backed by improving home and stock prices. Another report today showed consumer confidence sank this month by the most in two years on concern the world’s largest economy will be set back by the fiscal gridlock in Washington.

Sales “ended the third quarter on a pretty solid note,” said Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut, and the top-ranked forecaster of consumer confidence. “That may not be sustained going into the fourth quarter.”

The Conference Board’s consumer confidence index slumped to 71.2 in October, a six-month low and weaker than the median forecast of economists surveyed by Bloomberg, the New York-based private research group’s data showed today. The 9-point drop from September’s revised 80.2 was the biggest slump since August 2011, when a prior political standoff over the budget prompted Standard & Poor’s to cut the country’s debt rating.

Stocks Rise

Stocks rose, with benchmark indexes climbing to records, as earnings beat estimates and data indicating slower growth fueled bets Federal Reserve policy, who began a two-day meeting, will maintain stimulus. The S&P 500 climbed 0.6% to 1,771.95 at the close in New York, its third straight all-time high.

Figures from abroad showed other economies are gaining traction. U.K. mortgage approvals rose in September to the highest level in more than five years, adding to signs of a strengthening property market that’s being stoked by government incentives.

The housing market in the U.S. is also making progress. Home prices in 20 U.S. cities rose in August from a year ago by the most since February 2006 as stronger demand boosted values, another report showed today. The S&P/Case-Shiller index increased 12.8% from August 2012, more than forecast, after a 12.3% gain in the year ended in July.

An improving housing market is probably contributing to the gains in spending. Nine of 13 major retail categories showed increases last month, led by a 0.7% advance at electronics dealers, the biggest since April, and 0.9% gains at both grocery stores and restaurants, the Commerce Department report showed.

New iPhones

Purchases of electronics probably got a boost from the Sept. 20 release of Apple Inc.’s two new iPhones models. The company sold a record 9 million iPhones in the weekend debut that included China among overseas markets.

Retailers may have also benefited from the surge in purchases of video games, whose 27% jump last month was driven by Take-Two Interactive Inc.’s “Grand Theft Auto V.”

Today’s report also showed sales dropped 2.2% at automobile dealers, after a 0.7% increase the prior month.

Vehicle demand remains a bright spot even though a quirk in the industry calendar hurt sales last month, data show. Cars and light trucks sold in September at a 15.2 million annual pace, down from an almost six-year high of 16 million the prior month, according to data from Ward’s Automotive Group. Deliveries for the first two days of September, including the Labor Day holiday, didn’t contribute toward automakers’ tallies because they were counted in August figures.

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