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Americans increased their spending at retailers last month by the most in two and a half years, driven by strong auto sales as residents of hurricane-ravaged areas replaced destroyed cars.

Retail sales rose 1.6% in September, after slipping 0.1% in August, the Commerce Department said Friday. Auto sales jumped 3.6%, the most since March 2015. Gas sales climbed 5.8%, the most in four and a half years, likely reflecting price spikes after Hurricanes Harvey and Irma.

Even excluding the volatile auto and gas categories, sales rose a solid 0.5%, up from a 0.1% gain in August.

Consumers are optimistic about the economy, unemployment has hit a 16-year low, and wages have ticked up in recent months. That should boost spending and broader economic growth in the coming months.

Most of the gains last month were likely fueled by Hurricanes Harvey and Irma, which slammed into Texas, Florida and other southeastern states in late August and September.

Sales at home and garden supply stores rose 2.1%, probably lifted by hurricane preparation, as well as repairs and renovations in the aftermath of the storms. Grocery store sales increased 0.8%, the most since April 2016, likely boosted by restocking after the hurricanes hit.

Sales at general merchandise stores, which include big box retailers such as Walmart and Target, rose 0.3%.

Online retailers reported another healthy gain of 0.5%. E-commerce sales have jumped 9.2% in the past year, more than double the overall sales increase of 4.4%.

Not all stores saw a boost: sales at furnishers fell, as did sales at electronics and appliance stores and sporting goods stores.

The retail sales report is closely watched because it provides an early read on consumer activity each month.

U.S. economic growth likely slowed in the July-September quarter as the hurricanes shut down thousands of businesses, employees were forced to miss work, and power was cut to millions of homes. Analysts forecast that the economy expanded at a 2% annual pace in the third quarter, down from a 3% gain in the April-June quarter.

Yet the economy is expected to rebound in the final three months of the year as rebuilding and repair work accelerates. Construction and engineering firms are expected to step up hiring as homes, commercial buildings and roads and bridges are fixed. Economists expect growth will pick up to a 2.5% to 3% pace.

Originally published on Advisor.ca
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