U.S. Retail Sales Top Estimates With Biggest Gain Since June

(Bloomberg) - US retail sales rose at the fastest pace in three months in September. They exceeded forecasts and were able to limit the recovery in consumer spending in the third quarter amid mounting headwinds.
The value of total sales rose 1.9% from the previous month after rising 0.6% in August, figures from the Department of Commerce showed on Friday. The median estimate in a Bloomberg poll of economists called for an increase of 0.8%. Excluding cars and gasoline, sales rose 1.5%.
The broad-based profit - the fifth consecutive increase - likely reflects consumers receiving higher savings and funds from temporary unemployment benefits, while delayed back-to-school shopping may also have boosted shopping.
However, the economic recovery from the downturn triggered by the pandemic is threatened by a new acceleration in coronavirus infections and the failure of Congress to agree on a new stimulus package. These developments appear to weigh on an already slow labor market recovery.
Read more: US manufacturing output fell unexpectedly in September
While the $ 600 weekly payments for unemployed Americans expired in July, a temporary program approved by President Donald Trump offered most benefit recipients an additional $ 300 per week for a limited time. However, funding for this program is declining and the wider decline in payments could affect future consumer spending.
"The additional $ 300 made a lot of money in September, and I think that helped boost consumer spending," said Ryan Sweet, director of monetary research at Moody's Analytics Inc. "moderate spending."
US stocks rose and hit their first price in four days.
A separate report released Friday showed that US manufacturing output fell unexpectedly in September, the first decline in five months and a sign of headwinds for the industrial sector as the pandemic continues to grip the world's largest economy. The 0.3% decline in factory production followed an upwardly revised 1.2% increase in August, Federal Reserve data showed.
Other data showed that US consumer sentiment rose to a seven-month high in early October due to an improved economic outlook, although confidence remained well below pre-pandemic levels.
Read more: U.S. consumer sentiment is rising and still below pre-virus levels
Another contributing factor to the strong retail sales could have been back-to-school shopping, which was postponed until September, said Michelle Meyer, director of US economics at Bank of America Corp. In a year where schools are returning later or not at all, or just a little confused about what that would be like, people might have delayed these purchases, ”she said.
Figures from the JPMorgan Chase Institute also showed that earlier in the year unemployment benefits inflated the bank accounts of unemployed Americans who have been using savings since the additional $ 600 expired in July.
Prior to Friday's report, analysts forecast that consumer spending rose 37.2% on an annualized basis in the third quarter, after falling 33.2% in the previous period. However, a slowdown to only 3.7% was forecast for the fourth quarter.
What Bloomberg's Economists Are Saying
“The strength of a wide range of recreational goods and back-to-school categories shows that a continuation of the work-from-home regime significantly disrupts normal seasonal patterns. Income that is not spent on personal services appears to find a point of sale elsewhere. "
- Andrew Husby and Eliza Winger
Read More
All but one of the 13 major categories gained weight in September, led by clothing, sporting goods and automobiles. The only sector that was in decline was electronics and home appliance businesses.
So-called control group sales, which some economists see as a more reliable measure of underlying demand, rose 1.4% from the previous month and also exceeded forecasts. This number does not include food services, car dealers, building materials stores and gas stations.
With the pandemic, consumption patterns have also changed. Total retail sales exceeded February levels, but some industries - including restaurants, clothing, electronics and home appliance stores - remain below last year's levels. Instead, consumers spend more at grocery stores, online sellers, and building materials retailers.
Excluding automobiles, retail sales rose 1.5% from 0.5% in August.
While overall consumer goods spending has risen to new highs, total spending, which includes both goods and services, remains below February's levels as the pandemic continues to hamper activities like travel. The Commerce Department will release September personal expense figures on October 30th.
Growth could weaken over the next three months, "but it will continue to make headway toward that V-shaped recovery," Morgan Stanley chief economist Chetan Ahya told Bloomberg Television. He expects the US economy to hit pre-Covid levels by the second quarter of 2021.
(Adds JPMorgan report)
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