Washington (AFP) – Retail sales in the United States accelerated in September, according to government data released Thursday, a positive sign for consumption as the election approaches. Overall sales rose 0.4 percent to $714.4 billion between August and September, according to Commerce Department data, beating analysts’ expectations. In August, sales edged up just 0.1 percent to $711.3 billion. Excluding auto and gas station sales, the overall monthly rise would have been even higher at 0.7 percent in September, the report added.
While the US central bank kept interest rates high for a large part of the year — raising the cost of borrowing for households and businesses to tamp down inflation — consumer spending has been more robust than expected. Households have been drawing down on savings from the Covid-19 pandemic period, and the economy could be given a further boost with the Federal Reserve starting to lower rates more recently.
But stronger retail sales growth than forecast “adds to rising doubt” on the number of Fed rate cuts to come this year, said Nationwide chief economist Kathy Bostjancic. Typically, lower rates are expected to support economic activity, and the robust spending in September caps off a strong advance in the third quarter, Bostjancic added. This also provides “strong momentum” heading into the year-end, giving Fed policymakers potential reason to adapt their rate reduction plans.
– ‘Encouraging’ – Compared with the same month a year ago, retail sales were up 1.7 percent in September. “The details of the report were encouraging, with spending on food services and a range of retailers contributing,” said economist Michael Pearce at Oxford Economics. He added that a resilient jobs market, strong household balance sheets, and declining interest rates point to consumption growth hovering close to three percent in 2025.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” said National Retail Federation chief economist Jack Kleinhenz. “Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season,” he added.
But Pearce warned that “the impact of Hurricanes Helene and Milton, together with large sales at online retailers Amazon and Walmart will make the October report particularly noisy.” Growth could also slow in the coming quarters with the rise in labor income cooling, credit conditions tight, and as households have exhausted excess savings, Pantheon Macroeconomics cautioned in a recent report.
© 2024 AFP
