U.S. retail sales increased more than expected in September, rounding out a strong quarter of economic activity, though the recovery from the recession is at a crossroads as government money runs out and new COVID-19 infections surge across the country.
Retail sales jumped 1.9% last month after an unrevised 0.6% gain in August, the Commerce Department said on Friday. Economists polled by Reuters had forecast retail sales rising 0.7% in September.
Retail sales have bounced back above their February level, with the pandemic boosting demand for goods complementing life at home, including cars, furniture and electronics.
Excluding automobiles, gasoline, building materials and food services, sales increased 1.4% last month after a downwardly revised 0.3% drop in August. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have dipped 0.1% in August.
Fiscal stimulus, especially a weekly subsidy paid to tens of millions of unemployed Americans, boosted retail sales, putting consumer spending and the overall economy on track to post their fastest growth on record in the third quarter.
Growth estimates for the July-September quarter are as high as a 35.2% annualized rate. The economy contracted at a 31.4% pace in the second quarter, the deepest decline since the government started keeping records in 1947.
But money from the government has virtually dried up. The White House and Congress are struggling a reach a deal on another rescue package for businesses and the unemployed. The government reported on Thursday that new claims for unemployment benefits increased to a two-month high last week.
Rising coronavirus infections could lead to business restrictions that could undercut spending on services such as restaurant dining, which remains below pre-pandemic levels.
Growth estimates for the fourth quarter have been cut to as low as a 2.5% rate from above a 10% pace. Some economists believe that historic savings could cushion consumer spending in the absence of the more financial aid from the government.