U.S. retail sales rise to 0.6% in September amid surge in auto purchases, discretionary spending
U.S. retail sales rebounded in September amid a surge in motor vehicle purchases and rise in discretionary spending, pointing to solid demand that reinforces expectations of an interest rate increase from the Federal Reserve in December.
Other data on Friday suggested a pickup in inflation, with producer prices rising broadly last month to record their biggest year-on-year increase since December 2014. The reports were the latest indication that the economy regained momentum in the third quarter after a lackluster first-half performance.
“Today’s data give the Fed a green light to raise interest rates by year-end. Retail numbers were solid and confirm that the economy is moving in what the Fed believes is an acceptable fashion,” said David Donabedian, chief investment officer at Atlantic Trust Private Wealth Management in Baltimore.
The Commerce Department said retail sales increased 0.6 percent after declining 0.2 percent in August. Sales were up 2.7 percent from a year ago.
Excluding automobiles, gasoline, building materials and food services, retail sales edged up 0.1 percent last month, reversing August’s 0.1 percent drop. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Though the small gain in core retail sales last month suggests a moderation in consumer spending from the second quarter’s robust 4.3 percent annualized rate, economists said they expected consumption grew at around a still solid 2.8 percent pace in the third quarter.
“Overall, the details of the report are more positive than what the modest print on core sales suggests,” said Brittany Baumann, an economist at TD Securities in Toronto. “Together with healthy levels of consumer sentiment and continued improvement in labor market conditions, today’s report is enough to keep a December Fed rate hike firmly on the table.”
Economists had forecast overall retail sales increasing 0.6 percent and core sales advancing 0.4 percent last month.
The dollar rose against a basket of currencies on the data, while prices for U.S. government debt fell. U.S. stocks were trading higher, also boosted by better-than-expected quarterly profits from JPMorgan, Citigroup and Wells Fargo.
