Retail Sales in U.S. Rise, Strong Consumer Spending

Retail sales in the U.S. rose barely during September as a bounce in purchases of motor vehicles was offset by the largest drop in spending at bars and restaurants in close to two years.

However, other details in the reports released on Monday by the Commerce Department were upbeat and hinted that spending by consumers ended the third quarter gaining momentum, which likely will give a boost to the growth of the economy despite the anticipated drags from  weaker exports and a housing markets that continues to struggle.

Retails sales were up just 0.1% in September after a gain of similar proportion during August. Economists were forecasting an increase in September of 0.6%.

Retails sales during September rose by 4.7% from the same period one year ago.

Excluding gasoline, food services, building materials and autos, retails sales were up just 0.5% a month ago, which are the core retails sales that are most closely comparable with consumer spending as part of the gross national product.

August data was revised downward to show that core retail sales had been unchanged for that month rather than an increase of 0.1% previously reported.

Consumer spending, which represents over two thirds of the activity in the U.S. economy, has been driven due to a strong labor market, as unemployment remains at 3.7% which is close to a 49-year low.

Tight conditions in the labor market are slowly pushing wage growth upward. Solid spending by consumers should also help offset an impact the economy has from the widening deficit in trade and persistent weakness across the housing market.

Estimates for growth during the third quarter for more than 3% based on an annualized rate. The economy expanded at a pace of 4.2% during the second quarter.

Strong growth in the economy likely will keep the U.S. Federal Reserve on course to increase interest rates against in December. The central bank of the U.S. hiked the rates in September marking the third times in 2018 they have done so.

In September, auto sales were up a strong 0.8% after dropping 0.5% during August. Receipts from clothing stores bounced back 0.5% after falling 2.8% during August. Mail-order and online sales soared by 1.1% during September following a rise of 0.5% in August.

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