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US retail sales rebound on autos, building materials
[WASHINGTON] US retail sales rebounded sharply in October as purchases of motor vehicles and building materials surged, likely driven by recovery efforts in areas devastated by Hurricane Florence.
The report on Thursday from the Commerce Department also showed broad gains in sales ahead of the holiday shopping season, which bodes well for consumer spending and the overall economy as the fourth quarter gets under way.
Retail sales increased 0.8 per cent last month after a downwardly revised 0.1 per cent dip in September. Economists polled by Reuters had forecast retail sales increasing 0.5 per cent in October after the previously reported 0.1 per cent gain in September. Sales rose 4.6 per cent from a year ago.
Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3 per cent last month. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Data for September was revised lower to show core retail sales rising 0.3 per cent instead of gaining 0.5 per cent as previously reported. Consumer spending, which accounts for more than two-thirds of US economic activity, is being underpinned by a strong labor market, characterized by a 3.7 per cent unemployment rate.
The lowest unemployment rate in nearly 49 years is boosting wages, with annual wage growth recording its biggest increase in 9-1/2 years in October. Jobs market strength was underscored by a separate report from the Labour Department on Thursday showing a marginal increase in the number of Americans filing for unemployment benefits last week.
Strong domestic demand and a tightening labour market support views that the Federal Reserve will increase interest rates in December for the fourth time this year. The US central bank last Thursday kept rates unchanged, but noted that the labour market "continued to strengthen and...economic activity has been rising at a strong rate."
The dollar held at higher levels against a basket of currencies after Thursday's data, while US Treasury yields fell.
The trend in retail sales, if sustained, could keep the economy on a solid growth path even as business investment is slowing, the trade deficit is expected to deteriorate further and the housing market continues to weaken.
Consumer spending expanded at its fastest pace in nearly four years in the third quarter. The economy grew at a 3.5 per cent annualized rate in the July-September quarter.
While the Commerce Department said it could not isolate the impact of Hurricane Florence, which lashed North and South Carolina in mid-September, on the retail sales, the storm probably boosted purchases of automobiles and building materials last month.
Auto sales jumped 1.1 per cent last month likely as residents in areas affected by Florence replaced damaged cars. Auto sales fell 0.1 per cent in September. Sales at building material stores surged 1.0 per cent in October.
There were also increases in sales at clothing stores, online retailers and service stations last month. Americans also spent more on hobbies and at bookstores, while cutting back on furniture purchases.
But spending at restaurants and bars slipped 0.2 per cent, likely hurt by Hurricane Michael, which soaked the Florida Panhandle in mid-October. Sales at restaurants and bars dropped 1.5 per cent in September.