Retail sales in the United States rose slightly higher than expected in September, supporting the view that the economy maintained a strong growth rate in the third quarter.
Retail sales rose 0.4% last month after an unrevised 0.1% increase in August, the Commerce Department's Census Bureau reported on Thursday. Economists polled by Reuters had expected retail sales, which are made up mostly of goods and are not adjusted for inflation, to rise by 0.3%.
Estimates range from no change to an increase of 0.8%.
Signs of economic resilience will likely not prevent the Federal Reserve from cutting interest rates further next month, but will reinforce expectations of a smaller reduction in borrowing costs by 25 basis points.
The US central bank kicked off its easing cycle last month with a big cut of half a percentage point in its policy rate, cutting it to a range of 4.75%-5.00%, amid growing concerns about the labor market. The Fed has raised rates by 525 basis points in 2022 and 2023 to reduce inflation.
Spending and the overall economy are supported by strong income growth, adequate savings and a strong household financial position. Although labor market momentum has slowed, layoffs remain historically low, supporting wage gains.
"As we have long emphasized, consumer spending, net hiring, and wage income have been locked in a strong, mutually reinforcing cycle throughout this expansion, driven by rising household wealth and labor supply," said Jonathan Millar, senior economist. US at Barclays.
Retail sales excluding automotive, gasoline, building materials and food services rose 0.7% last month after an unrevised 0.3% increase in August. These so-called core retail sales are closest to the consumer spending component of gross domestic product (GDP).
Estimated growth for the third quarter is around an annual rate of 3.2%. The economy grew at a rate of 3.0% in the second quarter.
