U.S. retail sales surged higher in September, the Commerce Department said Friday, setting up a record contribution for consumer spending to third quarter GDP.
Retail sales rose 1.9% from last year, the data indicated, and were 1.4% higher once volatile components such as auto, gas and building materials were stripped out, compared to a 0.1% pullback in August, with gains linked to unemployment benefits paid to millions of workers left at home during coronavirus shutdowns and back-to-school clothing sales, which helped boost activity at department stores around the country.
Total retail sales for the July to September period, the Commerce Department said, rose 3.6% from last year and suggests consumer spending, the most important contributor to U.S. economic growth, could lead to a third quarter GDP reading that is higher than 35%. That figure, the highest on record, would go some way towards reversing the 31.4% contraction recorded over the three months ending in June.
The first estimate of third quarter GDP data will be published on Thursday October 29, just four days prior to the November Presidential elections.
“The strength in August sales is welcome, and consumers in aggregate have the resources – in the form of the huge increase in savings deposits built up since the spring – to finance a strong holiday season. The problem is the virus,” said Ian Shepherdson of Pantheon Macroeconomics. “Cases are rising at only a modest pace in the more populous states, but we can’t be sure that will continue, and the message from states where cases have risen to very high levels is that economic activity begins to suffer very quickly.”