On Air Now

Upcoming Shows

Program Schedule »

Listen

Listen Live Now » 1450 AM Holland, MI

Weather

Current Conditions(Holland,MI 49422)

More Weather »
53° Feels Like: 53°
Wind: W 0 mph Past 24 hrs - Precip: 0”
Current Radar for Zip

Tonight

Clear 53°

Tomorrow

PM Thunderstorms 72°

Wed Night

Scattered Thunderstorms 57°

Alerts

Retail sales point to stronger economic growth

by
Economic growth
Economic growth

By Jason Lange

WASHINGTON (Reuters) - Retail sales rose in September as Americans stepped up purchases of everything from cars to electronics, a sign that consumer spending is driving faster economic growth.

Other U.S. data on Monday pointed to an economy feeling the effects of cooling global growth, with New York state factory activity shrinking in October.

But consumer spending remains the U.S. economy's biggest engine, and expectations for third-quarter economic growth improved after the Commerce Department reported a 1.1 percent increase in retail sales during September.

The reading, which beat analysts' forecasts, builds on other signs of growing economic momentum, including a drop in the jobless rate last month and a rise in consumer confidence.

"The news flow on the U.S. economy keeps getting better," said Chris Williamson, an economist at Markit in London.

Macroeconomic Advisers, a forecasting firm, raised its outlook for the pace of third-quarter economic growth to 1.9 percent, up three tenths of a point from its previous view.

The details of the retail sales report showed broad strength, with sales outside autos, gasoline and building materials -- a closely followed barometer of consumer spending -- climbing 0.9 percent last month. That was well above expectations.

"This is a good end of (the) third quarter and we have some good momentum to the fourth quarter," said Craig Dismuke, an economic strategist at Vining Sparks in Memphis, Tennessee.

Still, there were signs that some of the boost in spending could prove fleeting.

Sales at electronics retailers advanced 4.5 percent. Some analysts said that might reflect sales of Apple's newest iPhone model. If that is the case, that strength might show up in October as well and then fade, said Michael Feroli, an economist at JPMorgan in New York.

STEADY FED

Other temporary factors might be lending support as well. Sales at food and beverage stores climbed 1.2 percent, which might reflect some of the increase in food prices due to a recent drought. Also, receipts at gasoline stations rose 2.5 percent, reflecting an increase in prices paid at the pump.

Even if the pick-up in growth is lasting, the U.S. Federal Reserve is unlikely to reduce its support of the economy anytime soon, and one prominent U.S. central banker said on Monday the Fed won't rush its response to positive economic signals.

In September, the Fed launched a new open-ended plan to buy mortgage-backed securities until the labor market improves substantially. The Fed also pledged to keep interest rates low until even after the economy strengthens.

U.S. stock prices rose and yields on U.S. government debt climbed, as investors bet the data showed an improved economic outlook.

Sluggish demand and the drought restricted the economy to a 1.3 percent annual growth pace in the April-June period. Indeed, since the 2007-09 recession, weak growth has bedeviled the U.S. labor market.

Still, the U.S. unemployment rate has fallen surprisingly fast in recent months, dropping to 7.8 percent in September in a potential boost for President Barack Obama's chances of reelection on Nov 6.

In another report on Monday, the Commerce Department said U.S. business inventories increased 0.6 percent in August as auto dealers restocked.

Despite the positive signals on consumer spending, the economy faces stiff headwinds from abroad.

The New York Fed's "Empire State" general business conditions index registered minus 6.16 in October -- an improvement from the prior month but less of one than was expected.

It was the third straight month the index pointed to contraction in activity in New York state manufacturing, and the latest sign that the cooling of the global economy is being felt at American factories.

Economic growth has slowed around the globe as Europe's debt crisis has weighed on demand for manufactured goods, including those from China.

Worries about the European crisis and the possibility of belt tightening next year by the U.S. government have led many companies to postpone investments. For now, at least, consumer spending appears to be making up for some of that weakness.

(Additional reporting by Leah Schnurr and Richard Leong in New York; Editing by Andrea Ricci)

Comments