US Retail Sales Surge: September Sees Faster-Than-Expected Growth
The US consumer is doing well, as evidenced by retail sales growth in September that was faster than expected. This could influence the Federal Reserve’s decision-making process on interest rates at its next two meetings this year.
Retail sales in the largest economy in the world increased by 0.4% on a monthly basis, according to Commerce Department data released on Thursday. This represents an acceleration from an unrevised 0.1% increase in August. The reading of 0.3% had been seen by economists.
The statistic, which spends primarily for goods and isn’t adjusted for inflation, surprisingly increased in August, and the July figure was also revised upward.
Strong spending on necessities like food and apparel last month more than made up for a decline in purchases of more expensive things like gadgets and furnishings.
Nonetheless, Capital Economics analysts pointed out that the Chicago Fed’s weekly advance retail trade data, which was made public on Wednesday, showed some “clear” interruption from the catastrophic Hurricane Helene in September.
“[T]The analysts wrote in a letter to clients that “the prospects for October and the fourth quarter are looking softer,” citing earlier data that shows a significant decline in retail sales in the final week of September due to Hurricane Helene’s landfall and Milton’s additional disruption two weeks later.
The data is released as Fed policymakers consider their November monetary policy decision. At its most recent meeting in September, the central bank cut borrowing prices by an unprecedented 50 basis points, citing the need to assist the US labor market in the face of diminishing inflationary pressures.
Separate Labor Department data released on Thursday revealed that, in the week ending on October 12, the number of first-time claims for unemployment benefits decreased as anticipated to 241,000. The figure from the previous week was revised slightly upward to 260,000.
In the meantime, the four-week moving average increased by 4,750 to 236,250, attempting to take into consideration the volatility in the weekly release.
“The hot retail sales number for Sept[ember] fits with the upside pattern from last month […] and will push yields higher (while causing investors to further question the pace of [rate-setting Federal Open Market Committee] easing),” Vital Knowledge analysts wrote in a note.
They also mentioned that a number of important data points, such as the third-quarter GDP figures, the Fed’s preferred inflation estimate, and the October jobs report, are still pending before the Fed makes its next decision in November.
