October Consumer Spending Climbed Above Expectations

WASHINGTON — A measure of consumer spending rose more than expected in October as households bought a range of goods, suggesting positive momentum in the economy early in the fourth quarter.

Wednesday’s report on retail sales was the latest sign that a 16-day government shutdown last month had a limited impact on the economy and should ease concerns about the holiday shopping season.

“It reinforces the current narrative of sustained growth momentum in the recovery going into the last quarter of the year, even at a time when the economy was contending with the headwinds created by the government shutdown,” said Millan Mulraine, senior economist at TD Securities.

Despite rising consumer demand, inflation is still subdued.

Retail sales excluding automobiles, gasoline and building materials increased 0.5 percent last month after advancing 0.3 percent in September, the Commerce Department said. Overall retail sales rose 0.4 percent after being flat in September.

Economists polled by Reuters expected core retail sales, which correspond closely with the consumer spending component of gross domestic product, to rise 0.3 percent on average.

The better-than-expected increase in core retail sales suggested that consumer spending would most likely accelerate from a two-year low touched in the third quarter and probably diminishes some risk to economic growth during the fourth quarter.

The report added to data like nonfarm payrolls and manufacturing that have suggested the partial shutdown of the federal government had not inflicted widespread damage on the economy as initially feared.

Economists said fourth-quarter consumer spending was tracking an annual rate of about 2 percent, after increasing at a 1.5 percent pace in the period from July through September.

While consumer spending is picking up, the housing market is slowing after helping to push the economy forward.

A report from the National Association of Realtors showed that sales of existing homes fell 3.2 percent in October, declining for a second month in part because of high mortgage rates and a tight supply. The median price of a previously owned home was up 12.8 percent from a year earlier.

Increasing home values and soaring stock market prices are helping to support consumer spending. Consumer demand, however, is not enough to generate some inflation in the economy.

In a third report, the Labor Department said its Consumer Price Index slipped 0.1 percent last month as gasoline prices fell sharply, after rising 0.2 percent in September. It was the first decline in six months. Economists predicted consumer prices would be unchanged.

The Commerce Department also reported that business inventories rose 0.6 percent in September from August, while sales were up 0.2 percent.