US Markets
Tuesday, October 17th, 2023 1:51 pm EDT
Key Points
- Strong Retail Sales in September: Despite concerns about high interest rates and a weakening economy, U.S. consumers surprised by boosting retail sales well above expectations in September. Retail sales for the month rose by 0.7%, significantly exceeding the estimated 0.3% and indicating robust consumer spending.
- Exceeding Forecasts: Excluding auto sales, the increase was 0.6%, surpassing the projected 0.2%. The “control group,” which excludes various categories used in GDP calculations, also rose by 0.6%. These figures are not adjusted for inflation, suggesting consumers have kept up with rising prices.
- Impact on Monetary Policy and Future Expectations: These strong retail sales reports may complicate the Federal Reserve’s monetary policy decisions. While markets expect no rate hike at the upcoming meeting, the unexpectedly strong consumer spending raises the possibility of future increases if economic data remains robust. Despite potential headwinds, third-quarter economic growth is expected to be strong, with the Atlanta Fed’s GDP tracker indicating a potential annualized gain of 5.1%.
The Commerce Department’s advance report for September revealed that U.S. consumers defied expectations by showing robust spending, with retail sales rising 0.7%, exceeding the estimated 0.3%. Excluding auto sales, the increase was 0.6%, far surpassing the projected 0.2%. The control group, a measure used in GDP calculations that strips out various categories, also rose by 0.6%. These figures are not adjusted for inflation, indicating that consumers have effectively kept up with price increases, even in the face of headline inflation rising 0.4% in September. On a year-over-year basis, retail sales were up 3.8%, compared to a 3.7% increase in the Consumer Price Index (CPI). These strong retail sales reports suggest the U.S. economy is on track for a robust GDP number. It also reduces the likelihood of the Federal Reserve loosening its policy, keeping Treasury yields pushing toward 5%. The retail sales increases were widespread, with the most significant growth seen in miscellaneous store retailers (3%), online sales (1.1%), motor vehicle parts and dealers (1%), and food services and drinking places (9.2% year-over-year). However, some categories, including electronics and appliances stores and clothing retailers, saw declines of 0.8%. This unexpected consumer strength may complicate the Fed’s monetary policy decisions. In another report, the Federal Reserve announced that industrial production increased by 0.3% in September, beating the estimated 0.1%. The rate-setting Federal Open Market Committee is set to meet at the end of October, and while markets mostly expect no rate hike, strong economic data could lead to future increases. Despite potential headwinds, such as slowing employment growth and rising credit card balances, third-quarter economic growth is expected to be strong, with the Atlanta Fed’s GDP tracker indicating an annualized gain of 5.1%.
For full original article on CNBC, please click here: https://www.cnbc.com/2023/10/17/retail-sales-september-2023-.html
