U.S Retail Sales increased more than expected in October, while sales in September were revised higher, showing stronger economy may allow the Federal Reserve to raise interest rates next month. Retail sales rose 0.8 percent in October, the Commerce Department said Tuesday. September retail sales were revised to 1 percent increase from a previously reported 0.6 percent increase. These two months gain marked the largest rise in at least two years.
“The consumer is in good shape,” said Michael Gapen, chief U.S. economist at Barclays Plc in New York. “The pace of household spending is fairly solid. We expect a slight acceleration this quarter from the third-quarter rate.”
The so-called core retail sales, which excluding automobiles, gasoline, building materials and food services, increased 0.8 percent in October and was revised to 0.3 percent gain in September. These figures are used to calculate gross domestic product. Economists had projected overall retail sales to rise 0.6 percent and core retail sales to increase 0.3 percent in October.
“A strong October following a strong September is encouraging,” Tom Simons, a senior economist at Jefferies LLC, said before the report. “The labor market continues to be strong, and wage growth appears to be accelerating.”
Strong consumer spending and steady labor market supported the Federal Reserve to raise the borrowing cost in December. Consumer spending accounts for more than two-thirds of economic output in U.S. Economy picked up in the third quarter with a 2.9 percent annualized growth rate.