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Seasonal prices are boosting retail sales

A pedestrian walks in front of a store advertising a sale.

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Kai Ryssdal: The Commerce Department released some eye-popping retail sales figures for October (PDF) this morning. Eye-popping in a good way for a change, I'm happy to say.

They jumped twice as much as analysts were expecting -- the biggest rise since March. A hefty chunk of the American economy comes from consumer spending, so a strong showing in retail would normally be cause for celebration. And there was celebrating, that is. But only to a point.

As Marketplace's Janet Babin explains, seasonal adjustments can make those retail numbers look at bit better than they actually might be.


Janet Babin: Retail sales rose 1.2 percent last month -- mostly on the strength of auto sales. But it's not like car dealers were suddenly clearing every car off the lot. It's just that sales didn't fall as much as they normally do in October. And compared to where we've been the past few seasons, that makes the seasonal retail figure look higher.

Mark Vitner's a senior economist at Wells Fargo.

Mark Vitner: We fell so hard that any rebound looks large in percentage terms, but it's simply that we're bouncing from such a huge fall.

Retail sales that exclude things like cars, food, gas, were still encouraging, but rose a more modest point 4 percent. Economists exclude the prices of those things because they tend to bounce around a lot, and can end up distorting the numbers.

That said, Harvard Business School professor John Quelch says car purchases will do more to boost the economy, than say, clothing sales.

John Quelch: Cars require more services to be provided with them when they're new and in use.

Someone to finance the car, someone to maintain it, or, worst case scenario, to fix it. But no matter what the purchase, from durable goods like cars to a snowglobe stocking stuffer, shoppers still expect bargains as good as they might normally find on Christmas Eve.

Retail strategist John Long with Kurt Salmon Associates calls it "holiday creep."

John Long: While sales and promotions in past years have waited until week of Thanksgiving or even Black Friday, they happened earlier this year in the month of November, as enticements to get the best deals.

And that will keep up pressure on many retailers' bottom lines.

In New York, I'm Janet Babin for Marketplace.

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