Retail sales rose 0.4% in September, better than expected; Jobless claims sink

Consumer spending held back in September, based on a resilient economy now receiving a boost from the Federal Reserve, the Commerce Department said Thursday.

According to advance reports, retail sales rose a seasonally adjusted 0.4% in the month, up from an unadjusted 0.1% gain in August and better than the 0.3% Dow Jones forecast.

Excluding autos, sales accelerated 0.5%, better than forecasts for a rise of just 0.1%. The numbers are adjusted for seasonal factors but not inflation, which rose 0.2% in the month as measured by the consumer price index.

In other economic news Thursday, initial jobless claims filings rose to a seasonally adjusted total of 241,000, a decline of 19,000 and below estimates of 260,000, the Labor Department said.

Claims also fell after Hurricanes Helen and Milton, which tore through the Southeast in recent weeks and caused billions of dollars in damage. Filings in both Florida and North Carolina declined after jumping the previous week, according to unchanged data.

Stock market futures were higher after the report while Treasury yields also rose.

Together, the reports show that consumers, who power nearly two-thirds of all economic activity in the U.S., are still spending and holding up the labor market after signs of weakening through the summer.

On the retail side, spending increased at miscellaneous store retailers, which rose 4%, as well as clothing stores (1.5%) and bars and restaurants (1%). These increases offset a 1.6% decline at gas stations, with declines in electronics and appliance stores (-3.3%) and furniture and home furnishings (-1.4%).

Sales rose 1.7% from a year ago, compared to a 2.4% CPI rate for the same period.

The data comes after a month in which the Fed cut its benchmark borrowing rate by half a percentage point and indicated that further tapering is likely between this year and 2025.

Policymakers expressed confidence that inflation is on track to return to the Fed's 2% target. However, they expressed concern that the labor market is softening even with strong September wage growth and weekly claims that are roughly in line after a jump due to the storm's impact.

The European Central Bank cut its key deposit rate by a quarter point on Thursday, also expressing confidence in inflation amid concerns about a broader economic slowdown.

Despite the decline in initial filings, continuing claims, which trailed one week, rose to 1.867 million. Along with declines in storm-ravaged Florida and North Carolina, claims fell by an unchanged 7,812 in Michigan, which was hit by the Boeing strike.

The Philadelphia Fed also reported Thursday that its index of manufacturing activity for October rose to 10.3, representing the difference between companies seeing expansion versus contraction. The reading, up from 1.7 in September, was better than the estimate of 3.0.

Correction: The Philadelphia Fed manufacturing activity index was 1.7 in September. A previous version got the image wrong.