WASHINGTON: US retail sales increased more than expected in September as households boosted purchases of motor vehicles and spent more at restaurants and bars, suggesting the economy ended the third quarter on a strong note.
Retail sales rose 0.7% last month, the Commerce Department said on Tuesday. Data for August was revised higher to show sales advancing 0.8% instead of 0.6% as previously reported.
Economists polled by Reuters had forecast retail sales rising 0.3%. Retail sales are mostly goods and are not adjusted for inflation. They were also likely flattered by higher gasoline prices, which boosted receipts at service stations.
Despite the show of resilience, headwinds are rising for consumers. Higher interest rates as the Federal Reserve tackles inflation have pushed credit card delinquencies to an 11-year high. Consumers are increasingly relying on credit cards to fund purchases. Millions of Americans resumed payments on student loans in October, which economists estimated equal to roughly $70 billion, or around 0.3% of disposable personal income.
Nevertheless, consumer spending continues to be driven by a tight labor market, with the economy creating 336,000 jobs in September. Excess savings accumulated during the COVID-19 pandemic remain higher than previously estimated.
Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.6% in September. Data for August was revised up to show these so-called core retail sales gaining 0.2% instead of 0.1% as previously reported.
Core retail sales correspond most closely with the consumer spending component of GDP. Consumer spending is expected to have accelerated in the third quarter, thanks to a surge in July. Spending on services also remains solid, which should lift overall consumption.
Gross domestic product growth estimates for the third quarter are currently as high as a 5.1% annualized rate.
The economy grew at a 2.1% pace in the April-June quarter, and continues to push ahead despite the Fed hiking its benchmark overnight interest rate by 525 basis points since March 2022 to the current 5.25%-5.50% range.
Retail sales rose 0.7% last month, the Commerce Department said on Tuesday. Data for August was revised higher to show sales advancing 0.8% instead of 0.6% as previously reported.
Economists polled by Reuters had forecast retail sales rising 0.3%. Retail sales are mostly goods and are not adjusted for inflation. They were also likely flattered by higher gasoline prices, which boosted receipts at service stations.
Despite the show of resilience, headwinds are rising for consumers. Higher interest rates as the Federal Reserve tackles inflation have pushed credit card delinquencies to an 11-year high. Consumers are increasingly relying on credit cards to fund purchases. Millions of Americans resumed payments on student loans in October, which economists estimated equal to roughly $70 billion, or around 0.3% of disposable personal income.
Nevertheless, consumer spending continues to be driven by a tight labor market, with the economy creating 336,000 jobs in September. Excess savings accumulated during the COVID-19 pandemic remain higher than previously estimated.
Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.6% in September. Data for August was revised up to show these so-called core retail sales gaining 0.2% instead of 0.1% as previously reported.
Core retail sales correspond most closely with the consumer spending component of GDP. Consumer spending is expected to have accelerated in the third quarter, thanks to a surge in July. Spending on services also remains solid, which should lift overall consumption.
Gross domestic product growth estimates for the third quarter are currently as high as a 5.1% annualized rate.
The economy grew at a 2.1% pace in the April-June quarter, and continues to push ahead despite the Fed hiking its benchmark overnight interest rate by 525 basis points since March 2022 to the current 5.25%-5.50% range.