Retail sales topping estimates
U.S. retail sales rose in September at the fastest pace in three months, topping forecasts and capping a third-quarter rebound for consumer spending that faces increasing headwinds.
The value of overall sales increased 1.9 percent from the prior month after a 0.6 percent gain in August, Commerce Department figures showed Friday. The median estimate in a Bloomberg survey of economists called for a 0.8 percent gain. Excluding autos and gasoline, sales rose 1.5 percent.
The broad-based gain may partly reflect consumers tapping elevated savings, with demand also supportedby temporary extra jobless benefits and continued hiring. The economy’s rebound from the pandemic-driven downturn is threatened, though, by a new acceleration in coronavirus infections and Congress’ failure to agree on a fresh stimulus package, developments that appear to be weighing on an already-slowing labor market recovery.
U.S. stocks gained, heading for their first advance in four days.
While the $600 weekly payments for jobless Americans expired in July, a temporary program authorized by President Donald Trump provided most benefit recipients $300 extra a week for a limited time. But funding for that program is dwindling, and the broader dropoff in payments risks a hit to future consumer spending.
“The extra $300 kicked in a lot in September and I think that helped boost consumer spending,” said Ryan Sweet, head of monetary policy research at Moody’s Analytics Inc. “With the absence of additional fiscal stimuluswe’re going to start to see spending moderate.”
A separate report Friday showed that U.S. manufacturing production unexpectedly declined in September, the first decrease in five months and a sign of headwinds for the industrial sector as the pandemic keeps its grip on the world’s largest economy.
The 0.3 percent drop in output at factories followed an upwardly revised 1.2 per
cent gain in August, Federal Reserve data showed.
Other data showed U.S. consumer sentiment ticked up in early October to a seven-month high on an improved economic outlook, though confidence remainedwell belowpre-pandemic levels. Those signs of rising consumer sentiment and retail sales helped oil pare losses.
Futures in NewYork traded near little changed after earlier falling asmuch as 2.2 percent on Friday.
“We’re having a much stronger consumer than we anticipated, despite a good part of the country struggling to find work,” said EdwardMoya, a senior market analyst at Oanda Corp. “Everyone is going to be still consuming awide variety of goods going into these coming months, and that’s going to be positive for crude.”
Crude futures in New York have clung close to $40-a-barrel since September amid uncertainty around a demand recovery with the virus raging. British Prime Minister Boris Johnson threatened to force Manchester into lockdown, and in the U.S., Texas is deploying medical teams to new hot spots in the state. Meanwhile, OPEC produc
ers and allies see a risk of an oil surplus if Libya’s production rises and demand remains depressed.
“We had some bright spots, but the outlook remains really challenged in terms of demand and the rising COVID cases,” said John Kilduff, a partner at Again Capital LLC. “We keep getting these dueling inputs where we get some hopefulness about things picking up and then get knocked back down.”
The Organization of Petroleum Exporting Countries and its allies continue to face calls to postpone their plans to taper output cuts. Given the uncertainty over the oil demand outlook, the right course of action is to wait for now, JPMorgan analysts includingNatashaKaneva wrote in a report.
The move to add another 2million barrels of day onto the market in January could be postponed by a quarter, the report said.
OPEC+ is also contending with the unexpected return of Libyan oil output, which hit 500,000 barrels a day this week. The group forecasts that global oil supplies could increase by 200,000 barrels aday next year if Libyamanages torevive supply.