US retail sales rose for a fifth straight month last month as consumers hit the malls in droves at the start of the holiday shopping season, evidence the recovery gathered steam in the fourth quarter.
Sales rose a solid 0.8 percent as shoppers snapped up clothing, sporting goods and other items, data from the US Department of Commerce showed on Tuesday.
The strong sales report, which contained upward revisions for both September and October, prompted economists to ratchet their fourth-quarter economic growth forecasts upward by as much as a full percentage point.
The economy grew at a tepid 2.5 percent annual rate in the third quarter and some forecasters now expect growth around 3.5 percent in the final three months of the year.
“The fourth-quarter is shaping up to be relatively decent, probably north of three percent,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.
Stocks on Wall Street rose on the data, but a weak earnings report from Best Buy Co Inc curbed gains. The top consumer electronics chain reported a decline in quarterly results and same-store sales and cut its full-year outlook.
US Federal Reserve officials meeting on Tuesday could nod to brighter prospects in a post-meeting statement at about 2:15pm. However, analysts did not expect it to waver in its commitment to buy US$600 billion in government debt to bolster the economy.
The US Federal Reserve on Tuesday steered a steady course through the shallow economic recovery, sticking to a massive spending plan and interest rates close to zero for the second year.
The central bank’s policymakers said the recovery was too weak to reduce high unemployment, a major challenge to getting the world’s largest economy back on a sustainable course, and inflation trends were worryingly weak.
“Information received since the Federal Open Market Committee [FOMC] met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment,” the committee said in a statement at the end of the panel’s final meeting of the year.
As widely expected, the FOMC left the key federal funds rate target between zero and 0.25 percent, where it has been since December last year in an attempt to support recovery from the Great Recession.
The panel “continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period,” it said, repeating its familiar wording.
The Fed noted “disappointingly slow” progress toward reaching the goals of its mandate to foster maximum unemployment and price stability, saying underlying inflation was hovering at a “somewhat low” level.