U.S. retail sales up 0.8% in October, reinforce December rate hike

http://www.reuters.com/article/us-usa-economy-idUSKBN13A1M6?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28Business+News%29

U.S. retail sales rose more than expected in October as households bought motor vehicles and a range of other goods, pointing to sustained economic strength that could allow the Federal Reserve to raise interest rates next month.

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The Commerce Department said on Tuesday retail sales increased 0.8 percent last month, also boosted by demand for building materials likely as households cleaned up and made repairs in the wake of Hurricane Matthew.

“This is just the kind of data the Fed doves need to see to convince them to hike rates in December. The economy is doing pretty well, this data is bullish for the economic outlook in the months ahead,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

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Adding to the report’s strong tone, September retail sales were revised up to show a 1.0 percent increase instead of the previously reported 0.6 percent rise. The combined September and October sales gain was the largest two-month rise since early 2014. Sales were up 4.3 percent from a year ago.

Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.8 percent last month after an upwardly revised 0.3 percent gain in September.

These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have risen 0.1 percent in September.

Economists had forecast overall retail sales increasing 0.6 percent and core sales advancing 0.3 percent last month.

The strong sales report is a good omen heading into the holiday shopping season. Last week, Macy’s and Kohl’s Corp expressed optimism about the holiday shopping season, despite reporting a decline in sales in the third quarter.

U.S. Treasuries were trading higher, while stocks rose. The dollar was little changed versus a basket of currencies.

SUSTAINED STRENGTH

September’s upward revision to core retail sales suggests that the economy’s 2.9 percent annualized growth rate in the third quarter could be raised when the government publishes its second estimate later this month.

Coming on the heels of data this month showing a rapidly tightening labor market and signs of a turnaround in the manufacturing sector, the upbeat retail sales report implied a pickup in economic activity early in the fourth quarter.


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