U.S. retail sales increased more than expected in October, boosted by purchases of motor vehicles and a range of other goods, suggesting that consumer spending could help to underpin the economy in the fourth quarter.
The Commerce Department said on Wednesday that retail sales rose 1.3% last month. Data for September was unrevised to show sales unchanged. Economists polled by Reuters had forecast sales accelerating 1.0%, with estimates ranging from as low as a 0.1% drop to as high as a 2.0% jump. Retail sales are mostly goods and are not adjusted for inflation.
Sales were also buoyed by higher gasoline prices, which lifted receipts at service stations. One-time tax refunds in California, which saw some households receiving as much as $1,050 in stimulus checks, also helped to underpin sales. In addition, Amazon held a second Prime Day promotion in October.
Massive savings accumulated during the COVID-19 pandemic, and strong wage gains amid a tight labor market, have generally helped consumers to weather higher prices and borrowing costs.
That support is expected to fade next year as tighter monetary policy dampens overall demand, weighing on the labor market and the economy. Low income households are believed to have already exhausted their pandemic savings.
The National Retail Federation forecast this month that holiday sales would grow between 6% and 8% this year. While that would be a step down from the 13.5% notched in 2021, it would be well above the 4.9% average over the past 10 years.
The Federal Reserve has raised its policy rate by 375 basis points this year from near zero to a 3.75%-4.00% range as it battles rampant inflation in what has become the fastest rate hiking cycle since the 1980s.
Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.7% last month. Data for September was revised higher to show these so-called core retail sales rising 0.6% instead of 0.4% as previously reported.
Core retail sales correspond most closely with the consumer spending component of gross domestic product.
A steady pace of consumer spending and a smaller import bill helped GDP to rebound at a 2.6% annualized rate in the third quarter after contracting in the first half of the year.
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