U.S. retail sales in September grew more than expected, with a fairly broad increase across all retail categories, indicating that strong consumer spending continues to fuel the economy.
Data released by the U.S. Department of Commerce on Thursday showed that on an unadjusted basis, retail sales in September increased by 0.4% month-on-month, higher than the 0.1% increase in August. Excluding sales of automobiles and gas stations, retail sales grew by 0.7%.
Out of the 13 categories reported, 10 categories saw growth, with department store retailers (including florists and pet stores) growing the fastest. Apparel and grocery stores also achieved steady growth. Gas station fuel income declined, reflecting the decrease in oil prices; while automobile sales saw little growth.
Some analysts believe that the sales data suggests the economy may continue to grow steadily in the next quarter, with a strong labor market and robust consumer demand.
"As we have long argued, consumer spending, net hiring, and payroll income have been locked in a resilient and self-reinforcing virtuous cycle throughout this expansion, supercharged by gains in household wealth and labor supply," said Jonathan Millar, senior U.S. economist at Barclays.
"Durable deterioration in consumer spending would require something to meaningfully undermine this cycle, such as increased precaution by consumers that lifts the saving rate or reluctance to hire by businesses, despite solid demand."
Although the retail report does little to reverse the expectation that the Federal Reserve will cut interest rates by 25 basis points next month, it further indicates that so far, the economy has shown little sign of substantial downward movement.
Notably, after the release of U.S. retail sales and jobless claims data, traders reduced their expectations for a Fed rate cut: U.S. Treasury yields rose sharply, with the 2-year Treasury yield rising by more than 5 basis points, now reporting 3.995%; the 10-year Treasury yield rose by more than 5 basis points, now reporting 4.073%.