WASHINGTON (Reuters) – U.S. retail sales rose faster in September, rounding out a strong quarter of economic activity, but the recovery from the COVID-19 recession is at a crossroads as state money runs out and companies continue to lay off workers.
New cases of coronavirus are also on the rise across the country, which could lead to restrictions for businesses such as restaurants, gyms and bars and undermine consumer spending. The economy is already shifting to lower gears. Other data Friday showed an unexpected drop in production at factories last month.
“Although sales growth is strong, it will slow down for the rest of this year and into next year,”
Retail sales rose 1.9% last month as consumers bought motor vehicles and clothing, ate out and sprayed out on hobbies. This was followed by an unused 0.6% increase in August.
Economists polled by Reuters had expected retail sales to rise 0.7% in September. Some said the September rise was likely exaggerated by difficulties in removing seasonal fluctuations from the post-shock data caused by COVID-19. Unadjusted retail sales fell 2.8% after falling 1.0% in August. (Graph: Retail)
The retail level has risen back above the level in February, when the pandemic increases the demand for goods that complement life at home, including furniture and electronics. An aversion to public transport has strengthened the purchase of motor vehicles. Retail sales rose 5.4% year-on-year in September.
They account for the commodity component of consumption expenditure, with services such as healthcare, education, travel and hotel accommodation being the second part.
Excluding cars, gasoline, building materials and food services, sales rose 1.4% last month after falling 0.3% in August.
These so-called core sales are most similar to the consumption component of gross domestic product. They are previously estimated to have fallen 0.1% in August.
Economists have attributed the strength of retail sales to fiscal stimulus, especially a weekly subsidy to tens of thousands of unemployed Americans. September’s robust sales strengthened expectations for record spending and economic growth in the third quarter.
Growth estimates for the quarter July-September are as high as an annual interest rate of 35.2%. It would recover approx. two-thirds of the lost output due to COVID-19. The economy contracted at a rate of 31.4% in the second quarter, the deepest decline since the government began holding posts in 1947.
U.S. stocks jumped from three straight days of losses on retail sales data and Pfizer’s announcement that they could apply for emergency use of its COVID-19 vaccine candidate as early as November.
Last month, sales at car dealers increased by 3.6%. Revenue from restaurants and bars increased 2.1%. Revenue from clothing stores increased by 11.0%.
“Some of the gain may have reflected increased demand from back to school sales, but with most schools distance learning, the reported strength seems dramatic and likely unsustainable,” said Kevin Cummins, U.S. chief economist at NatWest Markets in Stamford, Connecticut.
Even with September gains, sales at bars, restaurants and clothing stores remain well below their pre-pandemic level.
Purchases in electronics and household stores fell 1.6%.
Online and mail order sales increased by 0.5%. Sales of furniture stores increased by 0.5%. Sales in sports equipment, hobbies, musical instruments and bookstores increased again by 5.7%. These categories cut large year-on-year increases in September, which economists said showed the uneven impact of the recession.
“This is further evidence of how many top workers have managed to avoid the pandemic by working from home, while most lower paid workers have been forced to choose between jobs that put them at risk when they can find them. and unemployment, ”said Chris Lav, chief economist at FHN Financial in New York.
The White House and Congress are struggling to reach agreement on another rescue package for businesses and the unemployed. The government reported on Thursday that new demands for unemployment benefits rose to a two-month high last week.
Last month’s jump in retail put consumer spending on a higher growth path heading into the fourth quarter, which is likely to ensure the economy continues to expand, albeit at a moderate pace. Growth estimates for the fourth quarter have been cut to as low as a 3% rate from above a rate of 10%.
Some economists believe that historic savings could dampen consumer spending in the absence of more financial support from the government. Others warn, however, that rising COVID-19 infections and job losses could encourage some consumers to defeat and save savings.
A study by the University of Michigan on Friday showed that consumer sentiment rose in early October.
However, consumers were concerned about the current economic situation due to “slower employment growth, the resurgence of COVID-19 infections and the absence of additional federal emergency payments.”
They were less enthusiastic about buying household appliances. The percentage who thought it was a good time to buy a car was the lowest in nine years.
(Graphics: Consumer mood,)
Reporting by Lucia Mutikani; Edited by Chizu Nomiyama, Paul Simao and Andrea Ricci