Nov. 15 (Bloomberg) -- Retail sales rose more than projected in October as Americans snapped up Apple Inc. iPhones and demand for automobiles improved, giving the world's largest economy a boost entering the final quarter of 2011.

The 0.5 percent gain followed a 1.1 percent increase for September, Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News was a rise of 0.3 percent. Purchases of electronics jumped by the most in two years.

Consumer spending, the biggest part of the economy, needs to keep growing to bolster the expansion as the European credit crisis threatens to slow sales overseas. Nonetheless, retailers like Macy's Inc. and Kohl's Corp. plan to use discounts to lure shoppers during the holiday season as unemployment hovers around 9 percent and wage gains fail to keep up with inflation.

'Households continue to spend at a pace that can keep the U.S. economy comfortably out of recession,' said Eric Green, chief market economist at TD Securities in New York. 'These numbers give me more confidence that retailers' expectations of stronger sales growth this holiday season will come true.'

Economists' estimates in the Bloomberg survey ranged from a gain of 1.3 percent to a decline of 0.3 percent.

Other reports showed wholesale prices dropped in October and manufacturing in the New York region expanded in November for the first time in six months.

Prices Fall

The producer price index declined a more-than-projected 0.3 Percent, the first decrease in four months, as the cost of energy and automobiles decreased, according to the Labor Department. Economists forecast a 0.1 percent decrease, according to the Bloomberg survey median. The so-called core measure, which excludes volatile food and energy, was unchanged, marking the first time without an increase since November 2010.

The Federal Reserve Bank of New York's general economic index rose to 0.6, the first positive reading since May, from minus 8.5 in October. Economists projected the gauge would rise to minus 2, based on the median of 48 forecasts. Readings higher than zero signal companies in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are expanding.

Stock-index futures held earlier losses after the reports. The contract on the Standard & Poor's 500 Index expiring next month fell 0.7 percent to 1,243.6 at 8:55 a.m. in New York on concern that Europe will fail to tame its debt crisis. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.02 percent from 2.06 percent late yesterday.

Electronics Sales

Sales at electronics stores advanced 3.7 percent in October, the most since November 2009, today's report showed. Demand at non-store retailers, including Internet and mail-order companies rose 1.5 percent, the most in nine months. Both may reflect demand for the next generation of Apple iPhones.

Apple sold more than 4 million iPhone 4S devices in the first three days after it went on sale on Oct. 14, setting a record and more than double the 1.7 million sold by the Cupertino, California-based company last year, during the introduction of the previous model.

The company's profit for the quarter ended Sept. 24 missed analysts' predictions for the first time in at least six years, evidence that customers delayed iPhone purchases before the release of the latest model.

Broad-Based Gains

Nine of 13 major categories showed gains last month.

Sales rose 0.4 percent at automobile dealers, after a 4.2 percent increase the prior month, today's report showed. The results are in sync with industry figures.

Auto purchases ran at a 13.2 million annual rate in October, the highest since February and up from a 13.04 million pace in September, according to data from Ward's Information Products.

'Consumers are just saying it's time to get a new vehicle,' Ken Czubay, Ford Motor Co.'s U.S. sales chief, said on a Nov. 1 conference call. 'We're seeing that more and more everyday from our dealers.'

Purchases excluding autos increased 0.6 percent, today's report showed. They were projected to rise 0.2 percent, the survey median showed.

Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales climbed 0.6 percent after a 0.5 percent increase in the previous month.

Using Discounts

Retailers are crafting incentives to lure more shoppers during the November-December holiday period. Menomonee Falls, Wisconsin-based Kohl's, the fourth-largest U.S. department-store company, said it has stepped up marketing and promotions.

Macy's, the second-biggest U.S. department-store chain, is seeing 'the lower-income customer is struggling more than the middle- or upper-end customer,' according to Chief Financial Officer Karen Hoguet. The Cincinnati-based retailer has planned 'heavy promotions' for the holiday season.

A stronger labor market is needed to speed up growth in the third year of the recovery and to cushion the U.S. from risks related to Europe's sovereign debt crisis. Payrolls climbed by 80,000 workers in October, the smallest increase since June.

The jobless rate has been stuck around 9 percent or higher for more than two years. Hourly wages adjusted for inflation were down 1.8 percent in the 12 months ended in September. The savings rate for the month dropped to the lowest level since December 2007 as the lack of income forced households to put away less in reserve.

The Fed is 'focusing intently on supporting job creation,' Chairman Ben S. Bernanke said on Nov. 10 in El Paso, Texas, describing unemployment as 'painfully high.' While the economy is 'far from where we want it to be,' he said, inflation may stay under control for the 'foreseeable future.'

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net