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Instant view: Retail sales beat expectations in October

NEW YORK (Reuters) - Retail sales rose more than expected in October as strong receipts from motor vehicle and building material dealers offset the drag from service stations, suggesting the economy started the fourth quarter with some vigor.

A gauge of manufacturing in New York state rose in November, ending five straight months of contraction, while the outlook for coming months strengthened, the New York Federal Reserve said in a report on Tuesday.

U.S. producer prices fell for the first time in four months during October on lower prices for gasoline and consumer goods like passenger cars and men's clothing, a government report showed on Tuesday.

COMMENTS:

ALEX HODER, ECONOMIC ANALYST, FTN FINANCIAL, NEW YORK

"For PPI, it looks like the monthly index finally posted a significant decline, which we've been looking for the last few months. Hopefully that will filter into the core over the coming months.

"Empire was the first positive reading since May, and it bodes well for the November ISM report which we'll get the first week of December."

"Retail sales beat expectations. At first glance it looks like autos and gas were really strong.

"We did see a couple of months of auto sales growth, which is encouraging.

"I'm not really sure you can draw the conclusion that Operation Twist is working. It was targeted squarely on housing and it will take more than a month to filter through to the rest of the economy. We're going to look for mortgage rates to stay low and encourage refinancing activity, which should then encourage more consumption."

DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

"October retail sales with a 0.5% increase exceeded expectations for a 0.3% gain while the ex auto rise of 0.6% was well above a 0.1% consensus, sustaining a recent picture of surprising consumer resilience. The ex auto gain contrasts weaker than expected chain store sales data in the month and comes despite a negative contribution from price-sensitive gasoline. Sales ex autos and gasoline rose by 0.7% in October, the strongest rise since March. Back month revisions were minimal (neutral overall, -0.1% ex autos) leaving the focus on the surprisingly firm October data...A mixed breakdown means the upside surprise in October retail sales is not entirely convincing, and there must still be doubts over how long consumer spending can maintain its recent pattern of outperforming disposable income, which seems likely to be the case again in October unless income data also surprises on the upside. Still, Q4 consumer spending is off to a positive start and it looks like both consumer spending and GDP will be able to match or even exceed their improved Q3 paces in the final quarter of the year."

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