Bloomberg News

WASHINGTON - Retail sales were little changed in October as gains at building materials outlets and department stores offset a decline at auto dealers, government figures showed.

Sales increased 0.1%, to $273.2 billion last month following a 0.9% increase in September, the Commerce Department said. Excluding automobiles, sales rose 0.4%, to $206 billion after a 0.7% gain in September.

The October increase was the smallest in two months and suggests that falling stock prices, higher oil prices, and a series of Federal Reserve interest-rate increases have restrained spending.

"The consumer is still spending but a little more cautiously," said Tim McGee, chief economist at Tokai Bank Ltd. in New York. "Demand is not quite as red-hot as it was earlier and the Fed is seeing an economy that is slowing."

"The bottom line is there's nothing in here that's going to change the Fed's view," said Daniel Laufenberg, chief economist at American Express Financial Advisors in Minneapolis.

The Fed's Open Market Committee meets today and Wall Street dealers that trade directly with the Fed unanimously agreed the central bank will leave its target for overnight bank lending at 6.5%, according to a Bloomberg News survey.

"They'll remain on hold, and their statement will still contain some bias toward inflation risk," Mr. Laufenberg said.

Central bankers raised interest rates six times between June 1999 and May of this year in an effort to cool the economy and keep consumer demand from triggering an inflation outbreak.

October's rise in retail sales was led by a 1.6% increase in purchases of building materials and a 0.4% gain at department stores.

Sales at auto dealers fell 1% in October after rising 1.6% a month earlier. October's decline was the biggest since a 1% decrease in April, the government's figures showed. Automakers sold 16.9 million vehicles at an annual rate last month, the slowest pace in a year. That was down from a 17.9 million-unit pace in September.

Sales at clothing and accessory stores rose 1% after rising 1.4% in September. October is a discount month for many stores as they make room for holiday merchandise. Gap Inc., J.C. Penney Co., and other merchants used steep price markdowns to drive sales and clear inventory during the month.

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