Consumers have been fairly cautious with their wallets throughout the economic recovery. It has been hard to blame them, too, given the lackluster pace of improvement for the labor market as well as the significant overhang of debt still plaguing many consumers. Indeed, households have had little cause for celebration thus far and few incentives to ratchet up their spending activities. Even though September retail sales data do not portray a surge in spending or the unleashing of pent-up demand, the figures do suggest consumers are coming out of their fallout shelters and might be loosening up on the purse strings. Total retail sales expanded for the third consecutive month and suggest that real consumer spending used to estimate 2010Q3 GDP increased at a 2.6 percent annualized rate—an improvement over the 2.2 percent increase in Q2. Even excluding gasoline and auto sales, consumer spending trended higher measurably higher during the third quarter and should provide for at least a little optimism.

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