Clunkers program boosts auto sales 10.6%, while sales rise elsewhere By Rex Nutting, MarketWatch WASHINGTON (MarketWatch) - U.S. retail sales rose a seasonally adjusted 2.7% in August, the biggest increase in more than three years, boosted by government subsidies for cars, higher gas prices, and busy crowds at the malls, the Commerce Department estimated Tuesday. Sales were stronger than the 2.3% expected by economists surveyed by MarketWatch, largely because of widespread sales gains outside the gas stations and the auto lots. See Economic Calendar. Sales are down 5.3% compared with a year earlier. The figures are adjusted for seasonal differences, but not for price changes. Read the full government report. The strong August sales will probably boost consumer spending in the third quarter, and help the economy grow for the first time in more than a year, economists say. But some worry that the economy remains too dependent on government largesse, including fiscal stimulus and ultra-loose monetary policy. Consumer spending is likely to be sluggish going forward, with the unemployment rate heading toward 10% and families still struggling to pay off debts accumulated during the bubble years. Auto sales surged 10.6% in August on the back of the government's cash-for-clunkers program, which offered up to $4,500 toward the purchase of a new car if an older gas guzzler was traded in and destroyed. It was the largest increase since October 2001, when the automakers offered huge incentives to car buyers after the 9/11 attacks. Excluding autos, retail sales rose 1.1% in August, the biggest increase since February, and well above the 0.5% expected by economists. Meanwhile, gasoline station sales rose 5.1% on higher prices. Gas averaged about $2.58 a gallon in July and $2.68 a gallon in August. Excluding both autos and gas, retail sales rose 0.6%, the largest increase since February. In other reports released Tuesday, the New York Fed said factory activity in the state expanded in early September at the broadest rate since November 2007. \ Also, the Labor Department said producer prices rose 1.7% in August on higher petroleum prices. Core prices, excluding food and energy prices, rose 0.2%. See full story. Details of retail Sales were strong at traditional mall stores. Sales at general-merchandise stores rose 1.6%, the most in more than two years. Sales at clothing stores rose 2.4%, while sales at stores catering to leisure-time activities, such as sports and reading, rose 2.3%, also a two-year high. Sales of durable goods were mixed. Sales at electronics and appliance stores rose 1.1%. Sales at furniture stores fell 1.6%, and sales at hardware stores fell 1.2%. Small gains were recorded at food stores (up 0.5%) and drugstores (up 0.4%). Sales at restaurants and bars rose 0.3%. Sales at nonstore outlets, such as catalogs and online shopping, rose 0.1%. There were offsetting revisions to June and July's sales figures. Sales rose 0.9% in June and fell 0.2% in July.

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