WASHINGTON: US retail sales accelerated in September, rounding out a strong quarter of economic activity, but the recovery from the Covid-19 recession is at a crossroads as government money runs out and companies continue to layoff workers.
New coronavirus cases are also surging across the country, which could lead to restrictions on businesses like restaurants, gyms and bars, and undercut consumer spending. The economy is already shifting into lower gear. Other data on Friday showed an unexpected drop in output at factories last month.
Retail sales jumped 1.9% last month as consumers bought motor vehicles and clothing, dined out and splashed out on hobbies. That followed an unrevised 0.6% increase in August.
Economists polled by Reuters had forecast retail sales would rise 0.7% in September. Some said September's surge was likely exaggerated by difficulties stripping seasonal fluctuations from the data after the shock caused by Covid-19. Unadjusted retail sales fell 2.8% after dropping 1.0% in August.
Retail sales have bounced back above their February level, with the pandemic boosting demand for goods that complement life at home, including furniture and electronics. An aversion to public transportation has boosted motor vehicle purchases. Retail sales rose 5.4% on a year-on-year basis in September.
They account for the goods component of consumer spending, with services such as healthcare, education, travel and hotel accommodation making up the other portion.
Excluding automobiles, gasoline, building materials and food services, sales increased 1.4% last month after a downwardly revised 0.3% drop in August. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have dipped 0.1% in August.
Growth estimates for the July-September quarter are as high as a 35.2% annualized rate. That would recoup roughly two-thirds of the output lost because of Covid-19. The economy contracted at a 31.4% pace in the second quarter, the deepest decline since the government started keeping records in 1947.
Last month, sales at auto dealerships surged 3.6%. Receipts at restaurants and bars increased 2.1%. Receipts at clothing stores jumped 11.0%. Even with September's gains, sales at bars, restaurants and clothing stores remain well below their pre-pandemic levels.
Purchases at electronics and appliance stores fell 1.6%. Online and mail-order retail sales rose 0.5%. Furniture store sales gained 0.5%. Sales at sporting goods, hobby, musical instrument and book stores rebounded 5.7%. These categories notched big year-on-year increases in September, which economists said showed the uneven impact of the recession.
The White House and Congress are struggling to reach a deal on another rescue package for businesses and the unemployed. The government reported on Thursday that new claims for unemployment benefits increased to a two-month high last week.
Last month's jump in retail sales set consumer spending on a higher growth path heading into the fourth quarter, which will likely ensure that the economy continues to expand, though at a moderate pace. Growth estimates for the fourth quarter have been slashed to as low as a 3% rate from above a 10% pace.