News Americas

Tuesday 2 September 2014

Retail sales boost US economy

Jason Lange

Published 16/10/2012 | 05:00

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US retail sales rose in September as Americans stepped up purchases of everything from cars to electronics, a sign that consumer spending is driving faster economic growth.

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Consumer spending remains the US economy's biggest engine, and expectations for third-quarter economic growth improved after the Commerce Department reported a 1.1pc increase in retail sales during September.

The reading, which beat analysts' forecasts, builds on other signs of growing economic momentum, including a drop in the jobless rate last month and a rise in consumer confidence.

The details of the retail sales report showed broad strength, with sales outside autos, petrol and building materials -- a closely followed barometer of consumer spending -- climbing 0.9pc last month. That was well above expectations.

"This is a good end of (the) third quarter and we have some good momentum to the fourth quarter," US economic strategist Craig Dismuke said.

Still, there were signs that some of the boost in spending could prove fleeting.

Sales at electronics retailers advanced 4.5pc. Some analysts said that might reflect sales of Apple's newest iPhone model. If that is the case, that strength might show up in October as well and then fade, said Michael Feroli, an economist at JPMorgan in New York.

Other temporary factors might be lending support too.

Sales at food and beverage stores climbed 1.2pc, which might reflect some of the increase in food prices due to a recent drought. Also, receipts at petrol stations rose 2.5pc, reflecting an increase in prices paid at the pump.

Even if the pick-up in growth is lasting, the US Federal Reserve is unlikely to reduce its support of the economy anytime soon, and one prominent US central banker said yesterday that the Fed won't rush its response to positive economic signals.

In September, the Fed launched a new open-ended plan to buy mortgage-backed securities until the labour market improves substantially. The Fed also pledged to keep interest rates low until even after the economy strengthens.

Demand

US stock prices rose and yields on US government debt climbed, as investors bet the data showed an improved economic outlook.

Sluggish demand and the drought restricted the economy to a 1.3pc annual growth pace in the April-June period. Indeed, since the 2007-09 recession, weak growth has bedeviled the US labour market. (Reuters)

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