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by Rex Nutting

Washington — 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 boost consumer spending in the third quarter, and probably 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.

“We continue to believe that the consumer will trail rather than lead the recovery, and we will only be confident about the consumer when we see job growth and labor income gains,” wrote Stephen Stanley, chief economist for RBS Securities.

“The key question remains how much positive spillover the current spurt in growth will have for the labor market, which will be key in determining whether the economy has entered a positive feedback loop,” added Julia Coronado, an economist for BNP Paribas.

Read complete article.

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