- The Washington Times - Monday, October 15, 2012

U.S. consumers went on another shopping spree last month, driving up retail sales by a robust 1.1 percent in the second straight month of sizable gains, the Commerce Department reported Monday.

Consumers, who fuel about 70 percent of economic growth in the U.S., spent on everything from electronics to cars and home-improvement gear. The surge in spending follows reports showing that consumer sentiment soared to a five-year high last month in what appears to be a broad resurgence of the main engine driving the economy.

“U.S. households put their money where their mouth is. They do not only say that they feel more confident, they are also willing and able to spend,” said Harm Bandholz, chief U.S. economist at Unicredit Research. He noted that sales in the summer quarter increased at more than three times the tepid pace set in the spring.

The spending gains were led by a resurgence of car sales, which grew at a double-digit rates during the summer.

While the revival of consumer spending in recent months has been offset somewhat by anemic spending by businesses, Mr. Bandholz said he expects consumers to prevail in setting the future direction of the economy, as they are the final customers for most businesses.

“Consumer spending most likely won the tug-of-war against weaker business spending in recent months,” he said.

“The news flow on the U.S. economy keeps getting better, with retail sales reviving after a lull earlier in the year,” said Chris Williamson, chief economist at Markit. He also noted the “divergence between consumers and businesses,” which have a less-optimistic view of the economy at this time.

“Consumer spending is rising on the back of a growing feel-good factor,” he said. “The brighter mood among consumers is in turn probably linked to recent improvements in the labor market, signs of an upturn in the housing market and the Federal Reserve’s recent stimulus.”

Unemployment fell to 7.8 percent last month — the lowest in four years — as households reported a whopping 837,000 increase in jobs during the month.

Meanwhile, housing sales and prices are on the upturn in most areas of the country after a deep, five-year recession. The Federal Reserve has been trying to supercharge the housing recovery by driving 30-year mortgage rates to the lowest on record.

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