U.S. retail sales growth in September shows the economy is still on track, which may not prevent the Federal Reserve from cutting interest rates next month, but the magnitude of the rate cut is likely to be reduced.
On Thursday, the slight increase in September retail sales in the United States exceeded expectations, supporting the view of strong economic growth in the third quarter.
In September, the monthly retail sales rate in the United States recorded 0.4%, surpassing the expected 0.3% and the previous value of 0.1%. The initial jobless claims in the United States for the week ending October 12th were 0.241 million, lower than the expected 0.26 million, with the previous value revised up from 0.258 million to 0.26 million.
After the release of retail sales and initial claims data, traders expect the Fed's interest rate cut to decrease within the year. The USD index rose more than 20 points in the short term.
Retail sales reports do not show signs of weak consumption, leading to a decrease in the probability of a Fed rate cut in November from 95% to 87%. Non-physical retailers (mainly e-commerce) continue to perform strongly, with a 7.1% increase from last year. Food service and beverages are also performing well, with a year-on-year growth of 3.7%, which is a good sign of healthy consumption. Strong sales data indicate that consumer resilience is evident in the face of rising inflation and interest rates.
Excluding autos, rbob gasoline, building materials, and food services, retail sales increased by 0.7% last month, with an unrevised growth rate of 0.3% in August. This so-called core retail sales are most closely related to consumer spending in the GDP.
Signs of economic recovery may not prevent the Federal Reserve from cutting interest rates again next month, but it will strengthen expectations of only a 25 basis point rate cut.
Unexpected decline in initial jobless claims in the US may be distorted by hurricane weather. In the southeastern states affected by Hurricane Helenie, the number of applicants surged in the previous week, indicating potential fluctuations in the coming weeks.
The damage caused by hurricanes Helen and Milton has left many people unable to work, and may even be unable to apply for relief. This means that the number of applicants will continue to fluctuate in the short term, although economists expect this irregular situation to eventually calm down. Prior to this, the number of weekly applicants has remained low, partially due to relatively fewer Americans losing their jobs. The four-week moving average for initial jobless claims rose to 236,250, the highest level since August.
Steady income growth, sufficient savings, and a strong household balance sheet support consumer spending and overall economy. Despite some slowing momentum in the labor market, layoff numbers remain at historically low levels, supporting wage growth.
Barclays US Senior Economist Jonathan Millar said: “As we have long pointed out, throughout the economic expansion, consumer spending, net hiring, and wage income have been in a resilient and self-reinforcing virtuous cycle, with the increase in household wealth and labor supply providing the impetus for it.”
They believe that “for consumer spending to durably deteriorate, there needs to be some serious disruptive factors: for example consumers strengthening preventive measures to raise the savings rate, or companies unwilling to hire despite strong demand.”
Editor/Lambor
