U.S. retail sales surge 1.9% in September in show of strength for the economy – MarketWatch

The numbers: Sales at U.S. retail stores surged in September and rose for the fifth month in a row as Americans bought more clothes, went out to eat and splurged on new cars and trucks, suggesting an economic recovery was still well underway at the start of fall.

Retail sales climbed 1.9% last month, the government said Friday. Economists polled by MarketWatch had forecast a 1.2% increase.

Setting aside the large auto segment, retail sales were still quite strong, up 1.5%.

Although retail sales have snapped back quickly to pre-crisis levels and done so far faster than expected, many economists worry a letdown is coming. People are returning to work at a slower pace, the coronavirus is spreading rapidly again, and Washington has failed to pass a second coronavirus-relief bill, triggering fresh worries about the health of the economy.

Read:Jobless claims climb 53,000 to 7-week high of 898,000, point to more labor-market woes

What happened: Sales rose 3.6% at auto dealers in September. Auto sales account for about one-fifth of all retail spending and sometimes exaggerate the ups and downs in the report.

Yet sales also rose in every other major category, except for electronic and appliance stores. Clothing sales leaped 11% at the start of the new school year and cooler weather approached. Sales also increased almost 10% at department stores.

In another good sign, sales at bars and restaurants rose 2.1% as more places were able to open or increase occupancy. People tend to spend more at restaurants when they are more confident in the economy.

Restaurant sales are off about 14% compared to last year, however, and cooler temperatures could make it harder to serve more customers since fewer will be able to dine outside.

Stores that sell electronics and appliances were the only ones to post a decline. Receipts fell 1.6% last month.

See: MarketWatch Economic Calendar

Big picture: The increase in retail sales last month is the latest in a series of reports showing the economy was still expanding at a moderate pace in September.

The big question is whether the momentum can carry into October. A number of large companies in entertainment and travel have announced layoffs as they struggle to regain their customers, a potential setback for the economy. The coronavirus is also spreading rapidly again in many U.S. states and could lead to more government restrictions on business.

Many economists have urged the federal government to pass another major financial relief bill to prevent the recent economic progress from stalling, but Democrats and Republicans have been deadlocked for months.

See:MarketWatch Recovery Tracker

What they are saying? “The unexpectedly strong 1.9% rise in retail sales last month suggests the economy was carrying more momentum into the fourth quarter than anticipated,” said U.S. economist Michael Pearce of Capital Economics. “But we are wary of getting too carried away when events in Europe serve as a reminder of how quickly a renewed resurgence in virus cases could take hold, which could yet dampen the recovery in the U.S.”

Market reaction: The Dow Jones Industrial Average DJIA, +0.39% and S&P 500 SPX, +0.01% rose in Friday trades. Stocks fell on Thursday after U.S. jobless claims increased and investors grew worried about a rising number of coronavirus cases around the world.

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U.S. retail sales surge 1.9% in September in show of strength for the economy – MarketWatch

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