By Lucia Mutikani
WASHINGTON- US retail sales unexpectedly rose in August as a decline in receipts at auto dealerships was more than offset by strength in online purchases, suggesting that the economy remained on solid footing through much of the third quarter.
The report from the Commerce Department on Tuesday also showed retail sales were a bit stronger than initially thought in July.
It combined with the decline in the unemployment rate last month to push against financial market expectations for a half-percentage-point interest rate cut from the Federal Reserve on Wednesday. US central bank officials started a two-day policy meeting on Tuesday.
The Atlanta Fed raised its third-quarter GDP growth estimate to a 3.0 percent annualized rate from a 2.5 percent pace after the data. The economy grew at a 3.0 percent pace in the second quarter.
“There does not appear to be any reason for Fed officials to start out with a larger 50 basis points rate cut because whatever stress there is in the labor market, it isn’t translating into weaker economic demand,” said Christopher Rupkey, chief economist at FWDBONDS. “If this is an economy on the brink of recession, consumers certainly don’t see it.”
Retail sales increased 0.1 percent last month after an upwardly revised 1.1 percent surge in July, the Commerce Department’s Census Bureau said. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, falling 0.2 percent after a previously reported 1.0 percent jump in July. – Reuters
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