Friday, June 22, 2018
Business

Confident consumers give U.S. retail sales a lift

WASHINGTON — Americans spent more money at retailers in September — a buying surge that reflected growing consumer confidence and the launch of the latest Apple iPhone.

Retail sales jumped 1.1 percent last month, producing the best two months of sales in two years, according to figures released Monday by the Commerce Department.

"The consumer is back," said Joel Naroff, chief economist at Naroff Economic Advisors. "They are not spending money like it is going out of style, but they are spending at a more normal pace that is consistent with a moderately growing economy."

In September, retailers saw gains in almost every major category. That contrasted with August's retail sales, which rose almost entirely on the strength of auto sales and higher gas prices.

Sales of electronics and appliances last month swelled 4.5 percent, in part because of iPhone sales. Sales at auto dealers increased 1.3 percent. Building materials and garden supplies, furniture and clothing sales all gained, too.

Some of the September increase also reflected higher food and gas prices. If those prices continue to rise, consumers could cut back elsewhere, and that could keep growth from accelerating.

But economists pointed to a key measure of sales that rose a solid 0.9 percent without counting autos and gas station sales. Many observers say that shows consumers are not too worried.

"We saw a cautious consumer in August because they had to spend more on gasoline," said Chris G. Christopher Jr., senior economist at IHS Global Insight. "Now in September, the consumer is starting to spend more on other items. Consumers are feeling better."

Christopher said the introduction of the new iPhone was definitely a factor in September. He estimated that 4 million iPhones were sold in the United States in the latter half of September.

Economic growth was anemic in the first half of the year, held back by weaker consumer spending. The latest figures suggest consumers are shaking off high unemployment and the threat of tax increases that could come next year if Congress fails to reach a deal to prevent the economy from going over the "fiscal cliff."

Naroff says that threat has kept businesses from stepping up hiring. But he estimates that American consumers will help the economy emerge from the malaise that clouded the spring.

He predicts growth accelerated in the July-September quarter to a 2.6 percent annual rate — double the growth rate from spring. And he expects consumers will help the economy grow at 3.2 percent rate in the final three months of the year.

"What the recent economic reports suggest is that once the fiscal cliff issue is cleared, payroll and economic growth should surge regardless of the election results," Naroff said.

The economy has added an average of 146,000 jobs a month in the July-September quarter — more than twice the monthly pace in the April-June quarter.

More jobs and lower unemployment have consumers feeling more optimistic. The University of Michigan's survey of consumer sentiment released Friday showed a reading of 83.1 for October. That's up from 78.3 in September and the highest level since September 2007 — three months before the start of the Great Recession. Americans have also displayed their confidence by spending more on big-ticket items. Home sales are up from last year, which has lifted prices.

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