U.S. retail sales grow above expectations in October, consumer spending to grow strongly in Q4

U.S retail sales growth surpassed expectations in the month of October. The retail sales expanded 0.8 percent in sequential, as compared with consensus forecast of a rise of 0.6 percent. Increasing prices of gasoline contributed to the growth of retail sales. Sales at gasoline stations rose 2.2 percent. Excluding gas, U.S. retail sales rose 0.7 percent.

Meanwhile, the control group, which strips gas, autos and building materials and is used to calculate monthly personal consumption expenditures, also recorded a rise of 0.8 percent, noted TD Economics.

On the other hand, upward revisions were made to the September retail sales figures. Retail sales grew 1 percent in September, as compared with the initial print of 0.6 percent.

Robust spending growth in October, along with an upward revision to September augurs well for fourth quarter PCE. Given that the wages are increasing and that the labor market continues to add jobs at a decent rate, consumer expenditures are expected to grow strongly by annualized rate of 2.7 percent in the fourth quarter, according to TD Economics.

While other sectors might weigh on the U.S. economic growth, especially net exports as the temporary jump in soybean exports in the third quarter normalizes, the consumer spending strength should be sufficient to push the economic growth above the mark of 2 percent, said TD Economics. This seems like another sign for the Federal Reserve to hike policy rates in December.

At 05.00 GMT, the FxWirePro’s Hourly USD Strength Index stood highly bullish at 116.023.

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