Rise in Auto Sales Leads To More Buoyant US Retail Sales; Inflation Talks Arise Again

auto-salesRetail sales in the United States rebounded a bit last month, balanced by a small surge in motor vehicle sales and a slight pickup in discretionary spending. This should point us to solid demand that could reinforce several expectations of an interest rate hike from the Federal Reserve bank, in December.

Other data shared on Friday also suggests there has been a pickup in inflation as producer prices continue to rise broadly. In fact, last month’s jump was the biggest year-over-year increase on record since December of 2014. Obviously, this is a good indication that the economy is, in fact, regaining some momentum through the third fiscal quarter.

Naroff Economic Advisors chief economist Joel Naroff comments, “The consumer is spending and cost pressures are slowly building. The argument against a rate hike is getting weaker and weaker.”

And a recent report from the US Department of Commerce confirms that retail sales are up 0.6 percent after falling 0.2 percent in August. More importantly, though, sales are up from 2.7 percent from the same period last year.
More specifically—and not counting automobiles and gasoline, or building materials and food services—retail sales eked up just 0.1 percent last month, canceling out August’s 0.1 percent drop. But these particular retail sales were in the core retail departments so the spending more accurately reflects consumer spending.

According to TD Securities economist Brittany Baumann, “Overall, the details of the report are more positive than what the modest print on core sales suggests. Together with healthy levels of consumer sentiment and continued improvement in labor market conditions, today’s report is enough to keep a December Fed rate hike firmly on the table.”
Economists had originally forecast an overall retail sales increase of 0.6 percent with more core sales showing a 0.4 percent jump last month.

In essence, says PNC Financial Services Group deputy chief economist Gus Faucher, “The fundamentals for consumers are good: more jobs, accelerating wage growth as the labor market tightens, low inflation and low interest rates.”

Now, economists had predicted a pickup in gross domestic product growth though the end of the third quarter, supported by healthy consumer spending. Even with the weak retail sales in August, as we saw, measures of consumer sentiment imply lofty confidence.

“Household spending has been the main contributor to real GDP growth over the past four quarters, and, with solid gains in employment and household income and upbeat consumer sentiment, this sector should continue to support growth over the second half of the year,” remarked Federal Reserve Vice Chairman Stanley Fischer, just last weekend.

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