US retail sales rose more than expected in October as consumers increased spending despite the government shutdown during the first half of the month.
Americans spent 0.4 per cent more on retail and food services last month and the September reading was revised slightly upward to virtually unchanged, the Commerce Department said on Wednesday.
But excluding the car sector, retail sales rose a modest 0.2 per cent in October, slowing slightly from the prior month.
The October retail report topped the average analyst estimates of 0.1 per cent for both retail sales and sales excluding cars, a positive start for the fourth quarter and the lead-in to the holiday shopping season that accounts for a big part of retailers’ profits.
“A solid retail sales report for October – despite the Washington turmoil-related plunge in confidence last month,” said Jim O’Sullivan of High Frequency Economics.
The report’s data appears consistent with consumer spending on goods and services that fuels the US economy, he said.
The economist estimated total consumption starting the fourth quarter at a 2.5 per cent annual growth rate, up from a 1.5 per cent pace in the third quarter.
Year-over-year, October retail sales were up 3.9 per cent.
Excluding cars and automotive parts, sales were up 2.4 per cent from October 2012.
The better-than-expected numbers came despite a plunge in consumer confidence stemming from the October 1-16 partial government shutdown that furloughed hundreds of thousands of federal workers and rippled through the broader economy.
The shutdown was ended by a stop-gap budget bill passed by Congress that funds the government through to January 15.
“Gasoline prices at their lowest levels in more than two years put extra cash in consumers’ pockets in October, increasing the willingness to spend even while the government was shut down for the first half of the month,” said Jay Morelock of FTN Financial.
The report came as retailers were gearing up for fierce competition in holiday sales, in a shopping season six days shorter than last year due to the late Thanksgiving Day holiday, on November 28.
Major retailers like Walmart are already promoting sales ahead of Black Friday, the unofficial kick off of the shopping frenzy on the day after Thanksgiving.
Holiday retail sales were expected to show the weakest growth since 2009, said Chris Christopher of IHS Global Insight.
“Many retail chains are hoping for accelerated sales next week and are getting ready for a very intense Black Friday to Christmas Eve shopping season,” he said.
“Holiday retail sales in 2012 were 3.4 per cent higher than 2011, while this year we expect holiday retail sales to increase only 3.2 per cent.”
AFP
