U.S. Retail Sales Rise as Consumer Spending Remains Robust

Despite ongoing concerns about a slowing U.S. economy, consumer spending continues to show signs of strength. Indeed, a report released by the Commerce Department showed retail sales rose by 0.7% from August to September. Moreover, those sales were an increase of 3.8% above those reported in September 2022.

The U.S. Census Bureau estimates used in the report were adjusted for holiday and seasonal variation, but not for inflation. Those estimates easily beat Dow Jones forecasts, which had expected 0.3% growth for the month. Notably, sales at gas stations increased by 0.9%, which analysts attribute to last month’s spike in gas prices.

Examining the retail sales increase

In addition to rising spending at gas stations, consumer demand also rose by similar levels at restaurants and bars. Auto dealership sales enjoyed a 1% increase, continuing their August momentum. Amazon helped to drive online sales growth to a 1.1% increase as well.

Even as consumer spending increased in some sectors, it decreased in others. For example, clothing store receipts declined by 0.8%. Similar declines were seen in appliance sales and the purchase of expensive electronics. Construction materials and similar supplies saw a decrease of 0.2%.

Separately, the Commerce Department confirmed that business inventories were boosted by 0.4% in August. As some have noted, that inventory boost is largely tied to rising sales too. Meanwhile, the Federal Reserve reports that manufacturing output rose by 0.4% in September.

The Fed response

With most economists expecting strong economic growth reports for the third quarter, many observers are now awaiting the Federal Reserve’s response. Notably, the Federal Open Market Committee is scheduled to meet at the end of October. And while most experts anticipate no change in interest rates at that meeting, the prospects for future hikes are less clear.

As experts have noted, Fed Chair Jerome Powell has consistently suggested that some weakening in the economy will be needed to fully rein in rising prices. With continued job growth, strong retail sales, and other positive economic news, he is less likely to take any options off the table.

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