Retail sales in the US rise strongly in October

Las retail sales in the United States they rose more than expected in October, buoyed by purchases of motor vehicles and a variety of other goods, suggesting that consumer spending could help prop up the economy in the fourth quarter.

The strong retail sales published by the Department of Commerce this Wednesday and the signs of a slowdown in the inflation prompted cautious optimism that the economy could avoid a recession next year or experience only a mild slowdown.

We may be in for a soft landing after all,” said Paul Ashworth, chief North America economist at Capital Economics in Toronto.

The Commerce Department said Wednesday that retail sales rose 1.3% last month. Data for September was not revised to show unchanged sales.

Economists polled by Reuters estimated sales would accelerate 1.0%, with estimates ranging from a 0.1% drop to a 2.0% jump.

Retail sales are mostly goods and are not adjusted for inflation. In October they increased by 8.3% year-on-year.

Sales were boosted by higher gasoline prices, which raised receipts at service stations.

One-time tax rebates in California, in which some households received up to $1,050 in economic stimulus checks, also helped bolster sales. Also, Amazon made a second promotion Prime Day in October.

Massive savings accumulated during the Covid-19 pandemic and strong wage gains amid a tight job market have generally helped consumers weather higher prices and borrowing costs.

That support is expected to fade next year as tighter monetary policy reduces overall demand, weighing on the labor market and the economy. Low-income households are believed to have already depleted their savings accumulated in the pandemic.

The Federal Reserve has raised its policy rate by 375 basis points this year, from near zero to a range of 3.75% to 4%, as it battles inflation in what has become the steepest rate hike cycle since a decade from 1980.

The National Retail Federation forecast this month that holiday sales would grow between 6% and 8% this year. While that would be less than 2021’s 13.5%, it would be well above the 10-year average of 4.9%.

Other data released Wednesday indicated that US business inventories added 0.4 percent in September, just below polled analyst estimates for a 0.5 percent increase. In August, business inventories rose 0.9%, the government said.