U.S. Retail Sales Exceed Expectations in September, Strengthening Growth Outlook

Retail sales in the U.S. increased by 0.4% in September, surpassing expectations and signaling continued economic resilience in the third quarter. This follows a modest 0.1% gain in August, according to the Commerce Department. Economists had anticipated a 0.3% rise, with estimates ranging from no change to an 0.8% increase.

The stronger-than-expected retail performance supports views that the U.S. economy maintained solid growth, with third-quarter growth estimates hovering around a 3.2% annualized rate. In contrast, the economy grew at a 3.0% pace in the second quarter.

Despite this strength, it is unlikely to deter the Federal Reserve from further cutting interest rates. Analysts expect a smaller 25-basis-point reduction in November, following last month’s 50-basis-point cut that brought rates to a range of 4.75%-5.00%.

Retail sales excluding autos, gasoline, building materials, and food services—key indicators closely linked to consumer spending—rose by 0.7% in September, reflecting strong underlying economic activity. Robust income growth, savings, and strong household balance sheets continue to underpin consumer spending, despite a slight slowdown in labor market momentum.