WASHINGTON (AP) -- The U.S. Commerce Department reports on sales at retail chains and restaurants in October. The report will be released at 8:30 am EST Wednesday
SLIGHT GAIN: Economists forecast that retail spending rose 0.1 percent in October, according to a survey by FactSet. That would be an improvement from the 0.1 percent decline in September.
A sharp drop in auto sales caused largely by a calendar quirk lowered U.S. retail spending in September. Labor Day weekend auto sales were counted in August.
But excluding autos, gas and building supplies, sales rose 0.5 percent in September, an encouraging sign. Economists exclude those categories because they tend to be volatile.
GAS PRICES DROP: Overall spending may have been held down last month by cheaper gas prices, which could lower sales at service stations. The average price for a gallon of regular gas has fallen sharply since Labor Day and was at nearly a two-year low of $3.21 on Tuesday.
But a drop in gas prices could also give consumers more discretionary income ahead of the all-important holiday shopping season.
CONSUMER SUPPORT CRITICAL: The retail spending report is the government first look at consumer spending, which drives roughly 70 percent of economic activity.
Growth in consumer spending slowed from July through September, a troubling sign that Americans were losing confidence in the economy.
Unemployment remains still high at 7.3 percent, and those Americans who have jobs are not seeing much in the way of pay increases. That's contributed to their more cautious mood.
One encouraging sign is that hiring has picked up in recent months.
The economy created 204,000 jobs last month, many more than expected and a sign that companies shrugged off the 16-day shutdown. Employers have also added an average of 202,000 jobs per month from August through October. That's up sharply from an average of 146,000 in May through July.
The overall economy grew at an annual rate of 2.8 percent in the July-September quarter, faster than expected, and up from 2.5 percent growth in the April-June quarter. But much of the growth came from an increase in business stockpiling. Without a corresponding increase in spending, many economists believe companies will cut back on restocking in the October-December quarter, which would slow economic growth.
Many analysts believe the economy is growing at an annual rate below 2 percent rate in the current quarter.
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