Why US retail sales barely rises, Americans cut back on spending at restaurants?

Retail sales edged up 0.1 per cent last month after a similar gain in August. Economists polled by Reuters had forecast retail sales increasing 0.6 per cent in September.


Devdiscourse News Desk | Updated: 16-10-2018 01:38 IST | Created: 15-10-2018 18:40 IST
Why US retail sales barely rises, Americans cut back on spending at restaurants?
Receipts at furniture stores increased 1.1 per cent. Spending on hobby, musical instrument and bookstores rose 0.7 per cent last month. There were also increases in sales at electronics and appliances stores. (Image Credit: Twitter)
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U.S. retail sales barely rose in September as a rebound in motor vehicle purchases was offset by the biggest drop in spending at restaurants and bars in nearly two years.

But other details of the report from the Commerce Department on Monday were upbeat and suggested that consumer spending ended the third quarter with strong momentum, which should provide a boost to economic growth despite anticipated drags from weak exports and a struggling housing market.

Retail sales edged up 0.1 per cent last month after a similar gain in August. Economists polled by Reuters had forecast retail sales increasing 0.6 per cent in September.

Retail sales in September rose 4.7 per cent from a year ago.

Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.5 per cent last month. These so-called core retail sales correspond most closely with the consumer spending component of the gross domestic product.

Data for August was revised down to show core retail sales were unchanged instead of the previously reported 0.1 per cent gain. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, is being driven by a robust labour market, with the unemployment rate near a 49-year low of 3.7 per cent.

Tight labour market conditions are gradually pushing up wage growth. Solid consumer spending should help to offset the impact on the economy from a widening trade deficit and persistent weakness in the housing market.

STRONG ECONOMIC GROWTH

Growth estimates for the third quarter are above a 3.0 per cent annualized rate. The economy grew at a 4.2 per cent pace in the second quarter.

Strong economic growth likely will keep the Federal Reserve on course to raise interest rates in December. The U.S. central bank hiked rates last month for the third time this year.

The U.S. dollar dropped against a basket of currencies and prices of U.S. Treasuries slightly pared losses after the data on Monday. U.S. stock index futures were trading marginally lower.

Last month, auto sales surged 0.8 per cent after declining 0.5 per cent in August. Receipts at clothing stores rebounded 0.5 per cent after tumbling 2.8 per cent in August. Online and mail-order sales soared 1.1 per cent in September after rising 0.5 per cent in the prior month.

Receipts at furniture stores increased 1.1 per cent. Spending on hobby, musical instrument and bookstores rose 0.7 per cent last month. There were also increases in sales at electronics and appliances stores.

But Americans cut back on spending at restaurants and bars, with sales dropping 1.8 per cent. That was the biggest decline since December 2016.

While the Commerce Department said it was impossible to determine the impact of Hurricane Florence on the data, disruptions caused by the storm could have hurt sales at restaurants and bars last month.

Sales at building material stores nudged up 0.1 per cent in September. Receipts at service stations fell 0.8 per cent, likely reflecting a moderation in gasoline prices.

(With inputs from agencies.)

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