Although the dip in retail sales reported by the Commerce Department on Wednesday was the first since April, it came after consumers, aided by President Bush's third tax cut, went on a buying binge in July and August.
Retail sales went up by a strong 1.4 percent in July and then by 1.2 percent in August, according to revised figures. The increase in August's sales turned out to be two times bigger than the 0.6 percent rise that the government first reported a month ago, and the advance in July also was slightly larger than previously estimated.
Economists were predicting that the brisk performance in retail sales registered in July and August just couldn't be maintained in September; they had forecast a sales dip of 0.1 percent.
While shoppers were more selective in September, they still had an appetite to spend.
Excluding sales of automobiles, which fell by 1.6 percent in September, sales by all other merchants went up by a modest 0.3 percent — close to economists' forecast for a 0.4 percent increase in that category.
The decline in automobile sales last month, which economists predicted, came after a solid 0.9 percent advance in August.
The report showed that in September, shoppers trimmed spending on cars, electronics, sporting goods and home furnishings, but they boosted spending on building materials, clothes, health and beauty products and food.
Consumers, whose spending accounts for roughly two-thirds of all economic activity in the United States, have kept their pocketbooks and wallets sufficiently open since the 2001 recession to keep the economy going. And, they will play an important role in determining the strength of the economic recovery.
Economists figure consumer spending fueled strong gross domestic product growth of about 5.5 percent or more in the just-concluded third quarter, reports CBS MarketWatch Washington Bureau Chief Rex Nutting. Americans took advantage of tax cuts and low interest rates to finance their consumption.
But some economists worry that consumers can't maintain that level of spending without significant job growth.
Amid signs that the economy is picking up momentum, the Federal Reserve is expected to hold a main short-term interest rate at a 45-year low of 1 percent when it meets next on Oct. 28, economists say. Near rock-bottom rates may motivate consumers and businesses to spend and invest more, thus boosting economic growth.