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NorthEnd Private Wealth CIO Alex McGrath discusses his expectations for the upcoming Federal Reserve meeting and the third quarter earnings season.
Retail rose more than expected in September as the US economy continued to show signs of growth in the third quarter.
The Commerce Department’s Census Bureau said retail sales rose 0.4% last month, after an unchanged gain of 0.1% in August. Economists surveyed by LSEG had forecast retail sales to rise 0.3%. Estimates ranged from no change to an increase of 0.8%.
Retail sales excluding cars, gasoline, building materials and food services rose 0.5% in September, following an unchanged 0.3% increase in August. These so-called core retail sales most closely resemble the consumer spending component of gross domestic product (GDP). Growth estimates for the third quarter are around 3.2% on an annual basis. The economy grew by 3% in the second quarter.
Signs of the economy’s continued resilience are likely to increase the likelihood that the Federal Reserve will opt for a smaller 25 basis point cut in the fed funds rate when it meets early next month.
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Retail sales were stronger than expected in September. (Christopher Dilts/Bloomberg via Getty Images/Getty Images)
“Strong consumer spending in September indicates that economic growth in the previous quarter was solidly above trend,” said Jeffrey Roach, chief economist at LPL Financial. “Looking ahead, investors should pay attention to any signs that the unemployed are finding it harder to earn a paycheck. Our starting point remains that the Fed will probably cut a quarter of a percent in both November and December.”
The Fed began its rate-cutting cycle last month with a larger-than-normal 50 basis points cut, lowering the benchmark from a range of 5.25% to 5.5% to a new range of 4.75% to 5%.
Policymakers have raised interest rates from near zero to a 23-year high over the course of 2022 and 2023 to combat the economic crisis. rising inflationwhich reached a 40-year high of 9.1% in June 2022.
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Strong consumer spending signals that growth in the broader economy will remain strong when third-quarter data is released. (A customer shops at a Barnes & Noble/Getty Images)
Last month’s rate cut came amid growing concerns about the labor market, although the September jobs report released earlier this month came in warmer than expected, with 254,000 jobs addedaccording to the Ministry of Labor’s first reading of wage figures.
The Fed’s policy-making arm, the Federal Open Market Committee (FOMC), will hold its next meeting on November 6 and 7, right afterward. Election Day.
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Reuters contributed to this report.