U.S. retail sales jumped 1.1 percent during September

WASHINGTON -- 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 the government's first monthly look at consumer spending, which drives nearly 70 percent of economic activity. The report follows a jump in consumer confidence, a steep drop in the unemployment rate and a modest housing recovery that is helping lift home prices.

Economists said the gains in retail spending could help drive stronger growth in the second half of the year.

"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.

Still, Marple and other economists cautioned that consumer spending could slow next year if Congress fails to reach a budget deal to avert sharp tax increases and spending cuts.

And some economists noted that the September jump in retail spending was driven by iPhone sales. The gain may be reversed in coming months.

"This shouldn't be considered the start of a consumer revival," said Paul Dales, senior U.S. economist at Capital Economics.

Part 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.

Until recently, 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 rate of 1.3 percent in the April-June quarter. Most economists believe growth will stay around 2 percent for the year, although some said the latest retail sales figures could make growth slightly stronger.

There have been other positive signs that growth could pick up. The Conference Board reported that its consumer confidence index rose last month to the highest level since February. And the University of Michigan's preliminary survey of consumer sentiment in October rose to a five-year high.

The job market is looking a little stronger, too. The unemployment rate dropped to 7.8 percent last month, from 8.1 percent in August. It was the first time the rate has been below 8 percent since January 2009. And it fell because of survey of households showed more people found work, although many of the new jobs were part time.

A separate survey of employers showed only modest job growth. Still, the economy has added an average of 146,000 jobs a month in the July-September quarter -- more than twice the monthly pace in the April-June quarter.

The Federal Reserves' aggressive policies have helped lower interest rates, which has encouraged more home-buying and auto sales.

Home sales are up from last year, which has lifted home prices. When home prices rise, Americans tend to feel wealthier and tend to spend more.

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.