WASHINGTON (Reuters) – U.S. retail sales rose slightly more than expected in October, but underlying momentum in consumer spending appeared to slow at the start of the fourth quarter.
Retail sales rose 0.4% last month, following an upwardly revised 0.8% increase in September, the Commerce Department’s Census Bureau said Friday.
Economists polled by Reuters had forecast that retail sales, which consist mainly of goods and are not adjusted for inflation, would rise 0.3%, after a previously reported 0.4% increase in September. Estimates ranged from no change to an increase of 0.6%. Robust consumer spending helped the economy maintain its strong growth pace last quarter.
Consumption is largely supported by low layoffs, with additional help from strong household balance sheets thanks to a stock market rally and high house prices. Household savings also remain high.
Concerns have been raised that growth is mainly driven by middle- and upper-income households, which have greater flexibility and substitutability of consumption. But Bank of America’s card data shows that spending is resilient across all income groups.
“We don’t see any signs of increased dependence on credit cards across any income cohort,” said Aditya Bhave, a U.S. economist at Bank of America Securities. “We note, however, that higher-income households appear to perform better in certain service sectors, such as aviation, accommodation, entertainment and cruises.”
Retail sales excluding cars, gasoline, building materials and food services fell 0.1% last month, after an upwardly revised 1.2% increase in September. It was previously reported that these so-called core retail sales, which most closely resemble the consumer spending component of gross domestic product, rose 0.7% in September.
Consumer spending grew at an annual rate of 3.7% in the third quarter, accounting for most of the economy’s 2.8% growth rate in that period.
The Federal Reserve last week lowered its key daily interest rate by 25 basis points to a range of 4.50%-4.75%.
While the US central bank is widely expected to make a third rate cut in December, some economists say this will happen in the nick of time as no progress has been made in bringing inflation back to the 2% target.
Fed Chairman Jerome Powell said Thursday that “the economy is not signaling that we need to rush to cut rates.” The central bank started its policy easing cycle in September with an unusually large interest rate cut of half a percentage point, the first cut in borrowing costs since 2020.
