Consumers Show Signs of Stirring

U.S. retail sales rose for a third consecutive month in September, posting a stronger-than-expected increase that should fend off fears of a double-dip recession but doesn’t signal a strong recovery.

Separately, U.S. consumer prices barely budged during September in yet another sign the Federal Reserve might need to take action to combat continued weakness in the economy amid concerns about low inflation.

Retail sales rose 0.6% in September, the Commerce Department reported Friday. Economists surveyed by Dow Jones Newswires had projected sales would rise by 0.4%.

The increase follows a revised 0.7% climb in August — the biggest increase in retail sales in five months. The Commerce Department initially estimated August sales rose by 0.4%.

Despite the September increase, retail sales overall remain sluggish as the nation’s unemployment rate hovers near a 26-year high. Consumers facing a tough job market and stubbornly depressed housing values have continued to hold back spending.

But some retailers have slashed prices and managed to lure out shoppers. Among them: Macy’s and clothing retailer Aeropostale. Both reported modest increases in same-store sales in September. And retailers’ rising sales are bringing at least some optimism about the upcoming holiday shopping season.

September’s increase in retail sales was driven largely by purchases of automobiles, auto parts, electronics and appliances. Sales of autos and parts rose 1.6% in September, after rising a revised 1.0% in August. Excluding autos, all other retail sales climbed by 0.4%.

Meanwhile, clothing store sales dipped 0.2% in September as general merchandise sales remained flat, likely a reflection of the end of the back to school shopping season.

Sales at sporting goods, hobby, book and music stores increased by 0.2% in September.

Gas station sales rose 0.4% in September. Food and beverage store sales also increased 0.4%.

Furniture sales increased 0.5% while electronic, and appliance store sales jumped 1.5%.

Sales at health and personal care stores rose 0.5%. Mail order and Internet sales rose by 1.0%.

Inflation Remains Muted

The seasonally adjusted consumer price index for September rose by 0.1% from August, the Labor Department said in a report Friday. Consumer prices climbed by 0.3% in August.

The underlying inflation rate, which is more closely watched by the Federal Reserve, was unchanged in September. Those core consumer prices, which strip out volatile energy and food costs, were also flat in August.

Economists surveyed by Dow Jones Newswires had expected consumer prices to climb by 0.2% and the core CPI to rise by 0.1% in September.

Friday’s CPI data showed that compared to September 2009, consumer prices are up 1.1%. Core prices were 0.8% higher than a year earlier. That is below the Fed’s informal target of between 1.7% and 2.0%.

Some experts are worried about deflation in the U.S., which is a bout of falling prices and wages. Still, investors expect the Fed will announce a new bond-buying program at its next meeting on Nov. 2-3 in an effort to spur growth by keeping borrowing rates low.

Some Fed officials have suggested the central bank may have to do more than buy U.S. Treasury bonds to help the economy, such as declaring it wants inflation to rise temporarily above its informal target of around 2.0%. This is the second report out this week suggesting inflation risk is low. On Thursday, the Labor Department reported U.S. wholesale prices rose more than expected on meats and vegetables, but were tame excluding food and energy. “Over the last 10 months, core prices have increased 0.1% seven times, hardly sufficient to warrant concerns about inflation,” Miller Tabak analyst Dan Greenhaus said.

Without rounding, Friday’s report showed that consumer prices rose by 0.102% in September. Excluding food and energy items, consumer prices were up 0.001% unrounded.

Food and energy prices were tame in September. Food rose 0.3%. Energy increased 0.7%, after rising 2.3% in August. Natural gas fell in September but gasoline prices climbed.

As for prices in other sectors, housing and clothing fell, while medical care and new vehicles increased.

In a separate report, the Labor Department said real average weekly earnings decreased 0.1% in September from August.

Meena Thiruvengadam and Jeffrey Sparshot, Wall Street Journal, Dow Jones Newswires. Jeff Bater and Sarah N. Lynch contributed to this article.