Retail sales in the U.S. increased by 0.4% in September, reaching $714.4 billion, exceeding analysts’ expectations, according to Commerce Department data. This marks a stronger performance than August’s modest 0.1% growth. Excluding auto and gas station sales, the rise would have been even higher at 0.7%. Despite high interest rates set by the Federal Reserve to curb inflation, consumer spending has remained resilient, fueled by households drawing on savings from the pandemic era.
The stronger-than-expected retail performance raises doubts about the number of future rate cuts by the Fed, according to Nationwide’s chief economist Kathy Bostjancic. This momentum heading into the year-end could impact the Fed’s monetary policy.
Compared to a year ago, retail sales were up 1.7% in September, driven by spending on food services and various retailers. Oxford Economics’ Michael Pearce attributes this to a robust labor market, strong household finances, and declining interest rates, predicting consumption growth close to 3% in 2025. However, he cautions that factors like hurricanes and large sales events by Amazon and Walmart could distort the October report. Additionally, Pantheon Macroeconomics warns that cooling labor income, tight credit conditions, and exhausted household savings could slow growth in the coming quarters.
Overall, retail conditions remain favorable, with consumers continuing to drive the economy as the holiday season approaches.
Comment here