U.S. retailers are expected to post positive October sales results this week, but investors hoping for a clear signal on economic recovery could be in for disappointment, industry experts said.

Many top retail chains will report same-store sales results on Thursday, with the overall industry expected to post a 1.2 percent rise, according to Thomson Reuters data.

That compares with a 4.1 percent fall in October 2008, just weeks into a global financial markets collapse.

If the expected increase materializes, it will raise hopes that consumers are prepared to spend more during the crucial holiday season.

Our forecast is that we are on a recovery path but the recovery path will be uneven, said Frank Badillo, senior economist at Retail Forward. From month to month some of these numbers will give false signals either way. We are seeing a recovery that is zigzagging in a positive direction.

But high expectations mean any disappointment in sales results could fuel a retreat by investors on stocks that have risen in recent weeks, fueled by pockets of good news from a variety of retailers from J Crew Group Inc to TJX Companies Inc .

If expectations are too high, even if the absolute number shows sequential improvements, the stocks will sell off, said Needham & Co analyst Christine Chen.

The Standard & Poor's Retail Index <.RLX> has risen 1 percent this month, and almost 37 percent since January. That has fueled a belief among some on Wall Street that along with positive sales, retailers may raise outlooks next week.

Cool weather and new merchandise in stores before the holidays have both fueled spending, continuing on advances made in September, and easy comparisons with year-ago results.

Drugstore operators are expected to have fared the best in October with an expected rise of 3.4 percent, according to the Thomson Reuters data. Teen retailers face an estimated 2.8 percent same-store sales decline, driven by lingering weakness at Abercrombie & Fitch Co .

DATA CONFUSES PICTURES

But while sales trends have improved from a disastrous October 2008, data on the economy and consumer spending show shoppers remain tight-fisted and cautious.

On Friday, the Commerce Department reported that consumer spending fell 0.5 percent in September, the largest drop since December, following the end of the government's program to boost auto sales.

At the same time, the U.S. economy is officially out of recession with positive gross domestic product growth, according to data released on Thursday.

That means that optimism for October is tempered by realistic caution on the part of many, making sales numbers difficult to predict.

October was really the meltdown, so year-over-year compares are certainly better but even week over week is an improvement, said Chen, sounding the bullish view.

The ICSC-Goldman Sachs chain store sales index for the week ending October 24 rose by 0.1% from the prior week and increased by 2.4% from the same week of the prior year. That marked the fifth consecutive sequential week-over-week gain and the seventh consecutive year-over-year increase.

We shouldn't see any dramatic backtracking in the numbers, Badillo said. The improvement should at least hold ground if not show continuing improvement into October.

(Editing by Michele Gershberg, Bernard Orr)

Retail Fall