Consumer spending in September remained strong, indicating a robust economy that is receiving support from the Federal Reserve, as per the Commerce Department’s report on Thursday. Retail sales rose by 0.4% on a seasonally adjusted basis, surpassing the previously reported 0.1% increase in August and exceeding the 0.3% forecast by Dow Jones.
Excluding automobile sales, there was a 0.5% acceleration, outperforming the expected 0.1% rise. These figures are adjusted for seasonal variations but not for inflation, which increased by 0.2% in the month according to the consumer price index.
In other economic updates on Thursday, the Labor Department reported that initial unemployment claims totaled 241,000 on a seasonally adjusted basis, a decrease of 19,000 and lower than the anticipated 260,000.
Despite the impact of hurricanes Helene and Milton in the Southeast, which caused significant damage, claims decreased in Florida and North Carolina after a previous week’s increase, as per unadjusted data. Stock market futures and Treasury yields rose following these reports.
These reports indicate that consumers, who drive a significant portion of the U.S. economy, are still spending, and the labor market remains stable despite signs of weakening over the summer. Retail spending saw growth in miscellaneous store retailers (4%), clothing stores (1.5%), and bars and restaurants (1%), offsetting declines at gas stations (1.6%), electronics and appliances stores (3.3%), and furniture and home furnishing businesses (1.4%).
Compared to a year ago, sales increased by 1.7%, lower than the 2.4% CPI rate for the same period. The data coincides with the Federal Reserve’s recent rate cut and indications of further reductions in the future.
While policymakers are confident about inflation returning to the 2% target, concerns remain about a softening labor market despite strong September payrolls growth. The European Central Bank also reduced its key deposit rate by a quarter point, citing confidence in inflation and worries about a broader economic slowdown.
Continuing claims, which lag by a week, rose slightly to 1.867 million despite the decline in initial filings. The Philadelphia Fed reported an increase in its manufacturing activity index to 10.3 for October, surpassing the estimated 3.0 and up from September’s 1.7.
A correction was issued regarding the Philadelphia Fed’s manufacturing activity index, which was 1.7 in September, correcting an earlier misstated figure.
