U.S. retail sales was unexpectedly flat in September as high inflation and rapidly rising interest rates curbed demand for goods.
The Commerce Department said on Friday that the reading was unchanged in sales last month following a revised 0.4% increase in August. Sales in August were previously reported to have increased by 0.3%.
Economists polled by Reuters had forecast sales rising 0.2%, with estimates ranging from as low as a 1.1% decline to as high as a 0.8% increase. Sales are also slowing as spending shifts back to services. Retail sales for most goods, not adjusted for inflation.
Soaring costs for rent and health care have strained Americans' budgets leading to reduced spending on goods. This situation has been compounded by higher borrowing costs, which makes credit more expensive.
The Federal Reserve has raised its policy rate from near zero in March to the current range of 3.00% to 3.25% to combat inflation. A fourth consecutive 75 basis point interest rate hike is expected next month after data on Thursday showed inflation rose strongly in September.
Excluding sales of cars, gasoline, building materials and food services, retail sales rose 0.4% last month. Data for August was revised higher to show this core retail sales rose 0.2% instead of unchanged as previously reported.
Economists estimate that growth in consumer spending is likely to be below the annual rate of 1.0% in the third quarter after rising at a rate of 2.0% in the April-June quarter.
Still, GDP was expected to pick up again last quarter after two consecutive quarterly declines mostly as sluggish domestic demand curbed imports and the build-up of unsold stock in warehouses.
The Atlanta Fed estimated that GDP increased at a rate of 2.9% last quarter after falling at a rate of 0.6% in the second quarter. The government is scheduled to publish its third quarter GDP snapshot later this month.
