Published: Monday, 16 Nov 2009 | 8:36 AM ET

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Sales at U.S. retailers rose more than expected in October as consumers bought more motor vehicles and other goods, but the previous month's figures were revised sharply downward, a government report showed on Monday.

In a report that pointed to gradual improvement in spending, the Commerce Department said total retail sales increased 1.4 percent last month, the largest advance since August, after dropping by a revised 2.3 percent in September. Sales in September were previously reported to have declined by 1.5 percent.

Analysts polled by Reuters had forecast headline retail sales rising 1.0 percent last month. Sales in October were boosted by a jump in new vehicle and parts sales, which surged 7.4 percent.

In a separate report, the Empire State Manufacturing Index, which measures activity in New York, fell to 23.51 from 34.57.

Stock futures pared earlier gains and losses in the US dollar accelerated following the data.

Auto sales had slumped 14.3 percent the previous month following the expiration of the government's popular "cash-for-clunkers" incentive program in August that had buoyed demand for motor vehicles. Previously, the government had reported auto sales falling 10.4 percent in September.

With government stimulus behind the bulk of the economy's 3.5 percent annualized growth pace in the third quarter, there are fears that rising unemployment will continue to weigh on consumer spending and hold back the recovery.

Excluding motor vehicles and parts, retail sale rose by a smaller-than-expected 0.2 percent in October after increasing 0.4 percent in September, and advancing for a third straight month. Economists had expected a 0.4 percent increase.

Gasoline station sales were flat in October after rising 0.9 percent in September. Core retail sales excluding autos, gasoline and building materials rose 0.5 percent, advancing for a fourth straight month.

Sales of building materials dropped 2.4 percent last month after falling 0.6 percent in September.

Manufacturing Falls

A barometer of manufacturing in New York State fell in November, suggesting factory activity moderating for the first time in four months, the New York Federal Reserve said in a report on Monday.

The New York Fed's "Empire State" general business conditions index fell to 23.51 in November from 34.57 in October, which had been a five-year high.

Economists polled by Reuters had expected a reading of 30.0 in November.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

The moderation in growth was broad-based, fueling concerns that a key driver in the current U.S. economic recovery has hit a speed-bump.

The component on new orders—a proxy for future activity—fell nearly by half to 16.66, while the employment index fell to 1.32 from 10.39 in October.

The pullback in growth put less pressure on prices manufacturers said they paid this month. The prices paid index fell to 10.53 from October's 19.48.

Despite less optimism on current conditions, the survey's six-month outlook index advanced to 57.00, a level not seen since October 2004. 

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