US retail sales showcase resilience of economy's growth engine

U.S. retail sales strengthened in September by more than forecast in a broad advance, illustrating resilient consumer spending that continues to power the economy.

The value of retail purchases, unadjusted for inflation, increased 0.4% after a 0.1% gain in August, Commerce Department data showed Thursday. Excluding autos and gasoline stations, sales climbed 0.7%.

The sales figures cap another likely quarter of solid economic growth and consumer demand fueled by a hardy labor market. While the retail report does little to reverse expectations the Federal Reserve will cut interest rates by 25 basis points next month, it adds to evidence that the economy shows scant signs so far of materially down shifting.

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The S&P 500 opened higher while Treasury yields and the dollar also advanced.

While the retail figures offered a straight-forward momentum in the economy, separate releases Thursday bore the impact of temporary factors. Industrial production declined in September, largely due to a pair of hurricanes and a strike at Boeing.

Applications for jobless benefits fell a week after a steep increase due to Hurricane Helene, as well as some cutbacks in the auto industry that boosted unemployment insurance claims in the Midwest earlier this month. 

In the retail data, ten of the report's 13 categories posted increases, led by miscellaneous store retailers, which include florists and pet stores. Apparel and grocery stores also posted solid advances. Receipts at gasoline service stations decreased, reflecting cheaper prices at the pump. Auto sales barely rose, defying expectations for a bigger increase.

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The data showed so-called control-group sales — which feed into the government's calculation of goods spending for gross domestic product — surged 0.7% in September, the strongest in three months. The measure excludes food services, auto dealers, building materials stores and gasoline stations.

Control-group sales increased at a robust 6.4% annualized pace in the three months ended in September, the strongest since early 2023. Before the report, the Atlanta Fed's GDPNow forecast penciled in a 3.3% annualized increase in personal consumption for the third quarter.

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Figures issued late last month by the Bureau of Economic Analysis showed wages and salaries, unadjusted for price changes, increased 0.5% in August — the most in three months and suggesting consumers have the wherewithal to spend. And job growth in September was the strongest in six months, with employers adding more than a quarter million jobs.

However, research from Fed economists suggests that the consumers powering U.S. economic growth are increasingly those who are higher up the income ladder, and likely enjoying a wealth effect from asset-price gains.