According to a report released by the Commerce Department on Thursday, consumer spending showed robust performance in September, highlighting the economy’s strong capacity to withstand challenges, bolstered by actions from the Federal Reserve.
Initial findings indicated that retail sales experienced a seasonally adjusted increase of 0.4% compared to the previous month, which was a notable rise from an unrevised 0.1% increase in August. This figure also surpassed the Dow Jones prediction of a 0.3% rise.
When excluding auto sales, retail figures rose by 0.5%, beating the anticipated 0.1% rise. While these sales figures have been adjusted seasonally, they do not take into account inflation, which, based on the consumer price index, climbed 0.2% compared to the same period last year.
In a separate economic report on Thursday, the Labor Department revealed that initial jobless claims decreased by 19,000, bringing the total to a seasonally adjusted 241,000—lower than the projected 260,000.
This drop in claims occurred despite the impacts of Hurricanes Helen and Milton in the Southeast, which inflicted heavy damages totaling billions. Unadjusted figures showed that claims in both Florida and North Carolina declined after a spike in the previous week.
Following this news, both stock market futures and U.S. Treasury yields saw an increase.
Collectively, these reports indicate that consumers, accounting for nearly two-thirds of economic activity in the United States, continue to spend, while the job market remains stable after showing signs of decline earlier this summer.
Focusing on the retail sector, there were notable increases in spending at general merchandise stores (up 4%), clothing outlets (up 1.5%), and at bars and restaurants (up 1%). These gains helped offset a 1.6% drop in gas station revenues, a result of falling fuel prices. Additionally, sales at electronic and home appliance retailers dipped by 3.3%, and furniture and household goods fell by 1.4%.
Year-on-year sales were up by 1.7%, but this is lower than the 2.4% inflation rate during the same timeframe.
This comes after the Fed lowered its benchmark borrowing rate by 0.5 percentage points this month, signaling the likelihood of further cuts through 2025.
Federal policymakers have shown optimism that inflation is gradually moving closer to their 2% target, yet they remain wary of a potential softening in the labor market. This concern persists despite a strong increase in payrolls in September and relatively stable weekly claims post-storm spike.
Meanwhile, the European Central Bank also reduced its key deposit rate by a quarter of a percentage point on Thursday, citing worries about a broader economic slowdown, while maintaining confidence regarding inflation trends.
While first-time jobless applications decreased, continuing claims with a one-week delay slightly increased to 1,867,000. Besides the declines linked to storm-affected states like Florida and North Carolina, there were also reductions in claims from Michigan, which was impacted by Boeing’s recent layoffs, reflecting an unadjusted drop of 7,812 claims.
Furthermore, the Philadelphia Federal Reserve shared on Thursday that its manufacturing activity index rose to 10.3 in October, illustrating the gap between business growth and decline. This marked an increase from 1.7 in September and was higher than the anticipated 3.0.
Correction: The Philadelphia Fed Manufacturing Activity Index for September was indeed 1.7. The earlier version contained errors in the diagram.
