WASHINGTON, Oct 16 ― US retail sales rose more than expected in September, rounding out a strong quarter of economic activity, but the recovery from the recession is at a crossroads as government money runs out and new Covid-19 infections surge across the country.
Retail sales jumped 1.9 per cent last month as consumers bought motor vehicles and clothing, dined out and splashed on hobbies, the Commerce Department said on Friday. That followed an unrevised 0.6 per cent increase in August. Economists polled by Reuters had forecast retail sales would rise 0.7 per cent in September.
Excluding automobiles, gasoline, building materials and food services, sales increased 1.4 per cent last month after a downwardly revised 0.3 per cent drop in August.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have dipped 0.1 per cent in August.
Retail sales have bounced back above their February level, with the pandemic boosting demand for goods that complement life at home, including cars, furniture and electronics.
US stock index futures slightly extended gains after the report. The dollar was weaker against a basket of currencies. US Treasury prices were trading mostly lower.
Fiscal stimulus, especially a weekly subsidy paid to tens of millions of unemployed Americans, boosted retail sales, putting consumer spending and the overall economy on track to post the fastest growth on record in the third quarter.
Growth estimates for the July-September quarter are as high as a 35.2 per cent annualised rate. The economy contracted at a 31.4 per cent pace in the second quarter, the deepest decline since the government started keeping records in 1947.
But money from the government has virtually dried up. The White House and Congress are struggling a reach a deal on another rescue package for businesses and the unemployed. The government reported on Thursday that new claims for unemployment benefits increased to a two-month high last week.
Rising coronavirus infections could lead to business restrictions that might undercut spending on services such as restaurant dining, which remains below pre-pandemic levels.
Growth estimates for the fourth quarter have been cut to as low as a 2.5 per cent rate from above a 10 per cent pace. Some economists believe that historic savings could cushion consumer spending in the absence of more financial aid from the government.
Last month, sales at auto dealership surged 3.6 per cent after rising 0.7 in August. Receipts at restaurants and bars increased 2.1 per cent, though the pace slowed from the 4.3 per cent gain in August. Online and mail-order retail sales rose 0.5 per cent. Furniture store sales gained 0.5 per cent. Receipts at clothing stores jumped 11.0 per cent.
Sales at sporting goods, hobby, musical instrument and book stores rebounded 5.7 per cent. But purchases at electronics and appliance stores fell 1.6 per cent after months of strong gains. ― Reuters
