Morning Market Brief October 18, 2024

US retail sales increase in September

The US Census Bureau announced that retail sales in the US rose for a third straight month in September. US consumers have continued to show their relative resiliency despite tight financial conditions, which has helped prop up economic growth. While the US Federal Reserve Board (Fed) has begun lowering interest rates, the retail sales results left markets wondering how deep the Fed might cut rates this year.

• Retail sales in the US rose by 0.4% in September over the previous month. This marks the third consecutive increase in retail sales as US consumers continue to show their relative strength despite being challenged by high borrowing costs and elevated inflation. A Bloomberg survey showed economists were expecting a 0.3% increase over the month.
• September saw a rise in sales at miscellaneous stores. Sales at food and beverage stores and at clothing stores also increased over the month. Overall, 10 of the 13 categories tracked posted an increase over the month.
• Conversely, sales at gasoline stations dropped over the month, due in part to lower gasoline prices.
• The strong consumer might be pointing to relatively robust economic growth in the third quarter. The US economy has continued to expand in recent quarters, in large part due to a strong US consumer. However, concerns are mounting that a softer labour market could begin to impede consumer spending, which might hinder overall growth.

The main question posed after the retail sales release was how the Fed might react. Markets still expect the Fed to cut interest rates at its next meeting in November. However, the data raised expectations that the Fed will be able to navigate the economy through a soft landing. The US economy remains relatively healthy despite several headwinds that could hinder growth.

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