U.S. retail sales fell 1.5% in September but were stronger than the 2.1% decline that was forecasted as sales minus autos remained firm. Americans showed some resilience as they increased purchases of furniture (+1.4%), food (+0.7%) and clothing (+0.5%) which led to an increase of total sales minus autos of 0.5%. Car sales sharply fell by 10.4% following the end of the cash for clunkers stimulus program which led to a 7.8% rise the month prior. Therefore, looking at the two month averages of the various components we can see that demand is remaining firm as a stabilizing housing market and rising stocks are boosting consumer confidence. However, rising unemployment and the shock of the credit crisis has led to purchases becoming more scrutinized. Thus, any negative sign could lead consumers to retrench which could jeopardize any potential for a recovery. Fed chairman Bernanke has recognized this risk and for that reason has signaled to markets that the FOMC intends to keep interest rates low for the foreseeable future and maintain stimulus efforts into next year. The minutes from the central bank’s last meeting are due for release latter in the day which will give more insight into future policy.
