WASHINGTON, Sept 17 (Askume) – U.S. retail sales unexpectedly rose in August, showing the economy remained in solid shape through most of the third quarter.
Retail sales rose 0.1% last month after rising 1.1% in July, the U.S. Commerce Department’s Census Bureau said on Tuesday.
Economists polled by Askume had forecast retail sales, which are mostly goods and are not adjusted for inflation, would fall by 0.2% after a 1.0% rise was reported in July. Estimates range from a 0.6% decline to a 0.6% increase.
The report comes as Fed officials prepare for a two-day policy meeting.
Most economists expect the Fed to cut interest rates by 25 basis points on Wednesday, arguing that the economy is not in enough trouble to warrant the 0.5 basis point reduction expected by financial markets.
The unemployment rate fell to 4.2% in August after rising for four consecutive months to a nearly three-year high of 4.3% in July. Unemployment is mainly due to increased labor supply from immigrants, which is currently slowing.
Layoffs remain low by historical standards, allowing the labor market to continue to produce steady wage growth that supports consumer spending and the overall economy. Economists are divided over the effect of falling savings rates on spending.
The savings rate fell to 2.9% in July, close to 2008 levels, which some see as a sign of softer spending going forward. They also expect precautionary savings to rise if the labor market worsens, which could put pressure on spending.
Others, however, argue that the government does not fully capture the income of undocumented immigrants. They also note that strong household balance sheets supported future consumer spending amid rising home prices and stock prices .
The Federal Reserve has maintained its benchmark overnight interest rate at the current range of 5.25%-5.50% for more than a year, and has raised it by up to 525 basis points in 2022 and 2023.
Retail sales, excluding automobiles, gasoline, building materials and food services, rose 0.4% last month after rising 0.3% in July.
These so-called core retail sales reportedly rose 0.3% in July.
Core retail sales are most closely related to the consumer spending component of GDP. Consumer spending accelerated in the second quarter and entered a higher growth path in the July-September quarter.
Annual growth is expected to be around 2.5% in the third quarter. The economy grew 3.0% in the second quarter.
