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US retail sales drop 0.3% in October as consumers remain cautious

Americans cut back on spending at retail businesses in October, an indication that some remain cautious about the economic outlook.

The figures also show that Superstorm Sandy depressed car sales and slowed business in the Northeast.

The Commerce Department said today that sales dropped 0.3% after three months of gains. Car sales fell 1.5%, the most in more than a year.

Excluding cars, petrol and building materials, sales fell 0.1%. That followed a 0.9% gain in September for that category.

Online and catalogue purchases in the US fell 1.8%, the most in a year. Electronics and clothing stores also posted lower sales.

The government said Sandy "had both positive and negative effects" on sales. Some stores and restaurants closed and lost business. Others reported sales increases ahead of the storm as people bought supplies.

In September, retail sales jumped 1.3% as spending rose in nearly all categories. The buying spree helped lift economic growth in the third quarter and reflected growing consumer confidence. Consumer spending drives nearly 70% of economic activity in the US.

The October decline in retail sales may be temporary, economists said. They noted that car sales may pick up in November as Americans replace cars damaged by the hurricane.

Superstorm Sandy hit the US east coast on October 29 and disrupted businesses from North Carolina to Maine. Retail sales are likely to rebound this month, analysts said, because Americans are spending more on repairs and making up for lost shopping trips.

The Commerce Department's retail sales report is closely watched because it is the government's first look at consumer spending each month.

Hiring has picked up in recent months, which has boosted consumer confidence. US companies added 171,000 jobs in October and job gains in August and September were higher than first estimated. The unemployment rose to 7.9% from 7.8% as more of those out of work began searching for jobs.

A survey by the University of Michigan last week found that consumer sentiment improved for the fourth month in a row to its highest level in five years.