Retail sales rose in September as Americans bought more of everything from cars to electronics, a sign consumers are driving faster economic growth despite icy winds from the cooling global economy.
Other data on Monday showed manufacturing activity in New York state shrank in October, though the pace of contraction eased.
Retail sales, however, increased a higher-than-expected 1.1 percent last month, Commerce Department data said showed.
That is good news for the economy because consumer spending drives about two-thirds of economic growth, and the data points to a modest rebound after a sluggish summer.
“This is a good end of (the) third quarter and we have some good momentum to the fourth quarter,” said Craig Dismuke, an economic strategist at Vining Sparks in Memphis, Tennessee.
Even with a pick-up in growth, the U.S. Federal Reserve is unlikely to reduce its support of the economy anytime soon, and one prominent U.S. central banker said on Monday the Fed won’t rush its response to positive economic signals.
In September, the Fed launched a new open-ended plan to buy mortgage-backed securities until the labor market improves substantially. The Fed also pledged to keep interest rates low until even after the economy strengthens.
Stock prices opened higher on the stronger economic picture but later turned softer while yields on U.S. government debt climbed.
The data showed sales by retailers outside of autos, gasoline and building materials — a closely followed barometer of consumer spending — rose 0.9 percent last month.
That was well above the 0.3 percent gain expected by analysts in a Reuters poll, and suggests consumers did more to drive growth in the July-September period than economists had expected.
Still, the report points to only a modest pickup in consumer spending.
“It’s still lackluster growth,” said Stephen Stanley, an economist at Pierpont Securities in Stamford, Connecticut.
The details of the retail report showed broad strength, with sales of motor vehicles and parts up 1.3 percent.
Other categories were also strong, with sales at electronics retailers up 4.5 percent. Some analysts said that might reflect sales of Apple’s newest iPhone model. Sales at food and beverage stores also posted solid growth, climbing 1.2 percent.
Receipts at gasoline stations rose 2.5 percent, reflecting an increase in prices paid at the pump.
Sluggish demand and a punishing drought restricted the economy to a 1.3 percent annual growth pace in the April-June period. Before the retail sales report was released, economists were expecting growth to accelerate to a 1.6 percent pace in the third quarter, according to a Reuters poll.
Weak economic growth has bedeviled the U.S. labor market since the 2007-09 recession.
In recent months, the U.S. unemployment rate has fallen surprisingly fast, dropping to 7.8 percent in September and potentially giving President Barack Obama’s reelection campaign a boost. However, other measures of labor market health have improved more slowly.
The New York Fed’s “Empire State” general business conditions index improved less than expected to minus 6.16 in October, from minus 10.41 in September.
It was the third straight month the index pointed to contraction in activity in New York state manufacturing, and the latest sign that the cooling of the global economy is weighing on American factories.
Economic growth has slowed around the globe as Europe’s debt crisis has weighed on demand at factories, including those in China.
In another report, the Commerce Department said U.S. business inventories increased 0.6 percent in August, in line with analysts’ forecasts.
(Additional reporting by Leah Schnurr and Richard Leong in New York; Editing by Andrea Ricci)