Autos boost US retail sales recovery
Broad gains in sales ahead of the holiday shopping season, boding well for fourth quarter
US retail sales rebounded sharply in October as purchases of motor vehicles and building materials surged, likely driven by recovery efforts in areas devastated by Hurricane Florence.
Yesterday’s report from the Commerce Department also showed broad gains in sales ahead of the holiday shopping season, which bodes well for consumer spending and the overall economy as the fourth quarter gets under way.
Retail sales increased 0.8 per cent last month, after a downwardly revised 0.1 per cent dip in September. Economists polled by Reuters had forecast retail sales increasing 0.5 per cent in October after the previously reported 0.1 per cent gain in September. Sales rose 4.6 per cent from a year ago.
Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3 per cent last month. These so-called core retail sales correspond most closely with the consumer spending component of GDP.
Consumer spending rises
Data for September was revised lower to show core retail sales rising 0.3 per cent instead of gaining 0.5 per cent as previously reported. Consumer spending, which accounts for more than twothirds of US economic activity, is being underpinned by a strong labour market, characterised by a 3.7 per cent unemployment rate.
The lowest unemployment rate in nearly 49 years is boosting wages, with annual wage growth recording its biggest increase in 9-1/2 years in October. Jobs market strength was underscored by a separate report from the Labor Department, showing a marginal increase in the number of Americans filing for unemployment benefits.
Strong domestic demand and a tightening labour market support views that the Federal Reserve will increase interest rates in December for the fourth time this year. The US central bank last Thursday kept rates unchanged, but noted that the labour market “continued to strengthen and ... economic activity has been rising at a strong rate.”
The trend in retail sales, if sustained, could keep the economy on a solid growth path even as business investment is slowing, and the trade deficit is expected to deteriorate further.
The economy grew at a 3.5 per cent annualised rate in the July-September quarter.
Increase recorded in total retail sales last month
Growth in US economy in JulySeptember