Shoppers spent more than expected on a wide range of goods last month, a sign that consumer demand, the engine of U.S. economic growth, remains solid.
Retail sales, which are not adjusted for inflation, rose 0.4 percent in September from the previous month, slightly ahead of economists’ expectations, the Census Bureau reported on Thursday. Sales, excluding cars and gasoline, which can be more indicative of underlying trends, rose 0.7 percent, far ahead of forecasts.
“The September growth is a positive sign for the overall economy considering the pressure on consumers’ wallets due to persistently high prices,” said Mickey Chadha, a vice president at Moody’s Ratings.
Inflation has been cooling, but the past spike in prices continues to weigh on consumers. The labor market has held up, with 254,000 jobs added in September, helping to drive wage growth.
“The underlying trend in consumer spending remains strong,” Michael Pearce, deputy chief U.S. economist at Oxford Economics, said in a note. A resilient job market and declining interest rates are likely to bolster consumer spending in the coming year, he said.
Federal Reserve policymakers cut interest rates for the first time in more than four years at their meeting last month, and projected gradually lower rates in the coming months. Mary C. Daly, the president of the San Francisco Fed, said on Tuesday that the central bank should keep cutting rates even if the economy is robust, as long as inflation continues to cool.
Executives at consumer-facing companies have recently expressed some caution about the state of consumers.
Laurent Freixe, the chief executive of Nestlé, told analysts on Thursday that consumer demand has been “subdued” across the food giant’s operations in recent months, with particular softening in the Americas and Europe. Last week, PepsiCo lowered its annual sales growth forecast, which Ramon Laguarta, the company’s chief executive, attributed to weaker consumer spending as a result of inflation and higher interest rates over the past few years.
Matthew Shay, the chief executive of the National Retail Federation, said on a call with reporters this week that he expected consumers to be price-conscious and pragmatic during the holiday shopping season, a crucial period for retailers.
Big-ticket purchases like furniture, electronics and appliances were among the few weak spots in the retail sales report, recording declines in September.
The National Retail Federation said it expected holiday sales this year to be in line with the 3.6 percent annual increases that were typical before the coronavirus pandemic. The economy “looks much more like a prepandemic economy in terms of the spending patterns and the growth,” Mr. Shay said.
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