US retail sales rose a record 7.1% in October, drawn by favourable financing and heavy discounting that spurred car sales.

The jump in sales came after consumers cut back on their spending in September following the attacks on the US, pushing sales down by 2.2%, according to the Commerce Department.

Consumers spending accounts for two-thirds of all economic activity in the US.

The data follows the latest US interest rate cut last week to 2%, the lowest level in 40 years, and a fall in US economic output, or GDP, to 0.4% in the three months from July to September.

It offers some hope that the economy may avoid recession after September consumer spending data posted its sharpest monthly drop in over 14 years.

Record rise

The record increase in October retail sales was the strongest since Commerce Department began compiling data in its current form in 1992, and much higher than Wall Street expectations of 2%.

The strong report was due to a record 26.4% increase in car sales, which was driven by zero-percent financing offered by automakers, after falling 4.5% in September.

Excluding autos, retail sales were up 1.0% in October, also stronger than expected.

Year-on-year, retail sales in October were up 7.5%.

Retail sales in nearly all sectors rose in October, offset slightly by a drop at gasoline stations and furniture stores.