Lower unemployment and a stronger housing market are likely contributing to stronger retail sales as demand for autos increased in September and the longed-for back-to-school boost finally materialized.
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The projected .8% increase would build on the .9% increase in August. But increases in energy prices and concerns about the upcoming fiscal cliff scenario which would significantly raise taxes could put a damper on consumer spending just as it is picking up momentum.
Stronger employment growth is the key ingredient for higher consumer spending. Lower interest rates are the driving force for consumers to replace their old vehicles. Cars and light trucks sold at an annual pace of 14.9 million in September, the highest since March 2008.
Headwinds that could drag spending also include continuing uncertainty about the European markets as well as the health of the economic recovery in the US.
Investors are predicting that consumers will continue shopping based on the improved employment picture, positive signs from the housing sector, and brightening consumer sentiment.
Household purchases may have grown at a 1.9% annual rate during the third quarter. This would be on top of increases of 1.5% for each of the three prior months.
Consumer spending is estimated to have risen 2.1% during the third quarter.