By Harriet Torry and Sharon Nunn

WASHINGTON-- American consumers increased their spending only slightly in September, undershooting economists' expectations for a strong gain.

Sales at retail stores and restaurants rose 0.1% from the prior month to a seasonally adjusted $509 billion in September, the Commerce Department said Monday. From a year earlier, sales grew 4.7%.

Economists surveyed by The Wall Street Journal had expected a 0.7% month-over-month increase in September. Retail sales rose an unrevised 0.1% in August.

September's sales stagnation was led by a 1.8% decline in sales at food services and drinking places, that category's steepest month-over-month drop in nearly two years.

Motor vehicle sales picked up in September, rising 0.8% after a 0.5% decline in August. Excluding motor vehicles, sales fell 0.1% in September, missing economists' expectations for a 0.4% rise. Excluding gasoline, sales were up 0.2%. Excluding both categories, sales were flat on the month.

Consumer spending is a key driver of the U.S. economy, representing about two-thirds of economic output. Overall consumer spending was strong in the second quarter, a trend which Monday's report suggests abated toward the close of the third quarter.

Hurricane Florence, which made landfall in coastal North Carolina in mid-September, may have muddied consumer spending last month, although a Commerce Department spokeswoman said Monday's report couldn't measure the immediate impact on a specific sample.

Gas prices for U.S. drivers were $2.84 a gallon on average in September, unchanged from August, according to the U.S. Energy Information Administration, yet consumers spent less at gas stations. In September, sales at gas stations fell 0.8%, and were up 11.4% from a year earlier.

Sales at department stores fell 0.8%. Sales at nonstore retailers, such as purchases made online or from mail-order catalogs, increased 1.1%.

Retail sales data can be volatile from month to month. Measures of consumer confidence have remained high recently, supported by continued job gains and broader economic growth.

The Federal Reserve closely eyes consumer spending data as a gauge of economic growth, and central bank officials pointed to strong consumer spending as a factor in their decision to raise their benchmark interest rate in September to a range between 2% and 2.25%. They are widely expected to raise the rate again by a quarter percentage point in December.

The Commerce Department's retail sales report can be found at http://www.census.gov/retail/marts/www/marts_current.pdf.

(END) Dow Jones Newswires

October 15, 2018 08:45 ET (12:45 GMT)

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