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American shoppers played a significant role in boosting the US economy, with retail spending increasing by 0.4% in September. This growth exceeded expectations and was higher than the previous month. Wall Street responded positively to this news, with the Dow rising over 145 points at market open. Additionally, new applications for unemployment benefits saw a significant decline, indicating a strong economy.
Retail sales saw increases in most categories, with specialty stores, clothing stores, and health and personal care shops experiencing the highest growth. Sales at bars and restaurants also rose by 1% in September. However, spending at gas stations decreased by 1.6% due to lower gas prices. Excluding gas sales, retail spending showed a stronger 0.6% growth. Sales of electronics and appliances declined the most in September.
Consumer spending makes up a large portion of the US economy, with retail sales playing a significant role. Despite years of elevated inflation and interest rates, Americans continue to open their wallets and spend. The recent report on retail spending indicates that the economy is far from a recession. The Federal Reserve’s recent rate cut was aimed at preventing the job market from faltering, showing the central bank’s commitment to economic stability.
The Fed’s focus has shifted from controlling inflation to promoting maximum employment, as mandated by Congress. Before the rate cut last month, there were concerns about the labor market deteriorating. However, the September jobs report showed strong job growth and a lower unemployment rate than expected. This, coupled with healthy consumer spending, may impact future rate cut decisions by the Fed.
Analysts are divided on whether the Fed will lower interest rates again in the near future. While the strong retail sales data may lead to doubts about further rate cuts, monetary policy remains restrictive in certain sectors such as housing and auto. Investors are still expecting a quarter-point rate cut next month based on futures pricing. The overall trend for inflation is expected to remain downward, influencing the Fed’s decisions on monetary policy.
