US retail sector accelerates amid government shutdown
The United States retail sector advanced at a faster rate than expected in October, as consumer spending was undeterred by the 16-day partial government shutdown. Retail and food sales increased 0.4 percent, the most in three months. The median estimate of 86 economists polled by Bloomberg called for a modest rise of 0.1 percent.
Sales excluding motor vehicles and parts rose 0.2 percent, while sales excluding automobiles, gasoline and building materials rose 0.5 percent, according to the Commerce Department. The numbers show the US economy was on the right footing at the start of the fourth quarter, despite the uncertainty surrounding the government budget.
“Maybe the rhetoric was just a little bit overblown in terms of the magnitude of the economic impact behind the partial government shutdown,” said Michael Brown of Wells Fargo Securities. The partial government shutdown is projected to have cost the US economy $24 billion, according to S&P’s Rating Service.
Market participants were concerned a slowdown in the retail sector in October could dampen holiday shopping. Declining fuel costs and growing household wealth may keep consumer spending power in-tact heading into the last two months of the year. Household wealth has been supported by a booming stock market and rising home prices. The S&P 500 Index is on pace for its best year since 2003, while home sales rose at an annualized rate of 12.8 percent in 20 US cities in August.
Cheaper fuel didn’t help gasoline stations, which declined 0.6 in October. Spending at sporting goods, hobby, book and music stores rose 1.6 percent, according to preliminary estimates. Spending at electronics stores and clothing stores rose 1.4 percent. Food service and furniture sales rose 1 percent.
Retailers are heading into their most important season; November and December sales account for up to 40 percent of their total annual revenue and 20 percent of total profit, according to the National Retail Federation.
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