U.S. retail sales rise in September, consumer spending likely to continue supporting economic growth

U.S. retail sales grew in September, coming in line with consensus projections. According to the advance Census Bureau report, the retail sales in the nation increased 0.6 percent in the month. The solid rise in September comes after a slight upward revision to the earlier two months’ prints, noted TD Economics.

The headline figure was mainly driven by the rise in sales at gasoline stations, which rose 2.4 percent sequentially as prices of gas increased on the month. Excluding gas, sales rose 0.5 percent. Strong demand also benefitted auto dealers, who recorded a rise in sales of 1.1 percent in nominal terms. Core retail sales, which exclude autos and gasoline, grew 0.3 percent sequentially in September.

The control group, which excludes autos, gas, food services and materials, grew 0.1 percent. Sporting goods, miscellaneous and furniture stores also recorded strong sales. However, the increases were countered by drops in sales at health and personal care, electronics and general merchandise stores.

The retail sales report affirms that consumers in the U.S. continue to be the main growth driver of the economy as the important holiday shopping season approaches slowly. The advance prints imply that after the breather that consumers took in the earlier two months, they continue to be willing and able to spend, underpinning economic growth, stated TD Economics. The new data implies that PCE was close to 3 percent in the third quarter, assisting in raising GDP growth to around 2.7 percent.

Significantly, consumer spending is expected to continue underpinning the U.S. economy through the remainder of 2016, given the continued gains in job and wages that are expected to persist, according to TD Economics. Job growth continues to be solid with rebounding labor market conditions.

Given that the U.S. Fed is keeping a close watch on data at this point, the retail sales report affirms the narrative of consumer strength that the central bank is counting on to underpin the US economic growth. If data continue to come in strong, there is quite a possibility of the central bank hiking rate in December, added TD Economics.