Tag Archives: economic growth

Fed report shows wage pressures amid ‘modest to moderate’ economic growth

By Ann Saphir and Lindsay Dunsmuir

(Reuters) -U.S. employers reported significant increases in prices and wages even as economic growth decelerated to a “modest to moderate” pace in September and early October, the Federal Reserve said on Wednesday in its latest compendium of reports about the economy.

“Outlooks for near-term economic activity remained positive, overall, but some Districts noted increased uncertainty and more cautious optimism than in previous months,” according to the summary of information from the Fed’s 12 regional districts, prepared as part of a broad range of briefings ahead of policymakers’ Nov. 2-3 meeting.

Employment increased, though labor growth was dampened by a low supply of workers, despite wage increases designed to attract new hires and keep existing employees, the report said.

Most districts reported “significantly elevated prices,” with some expecting prices to stay high or increase further, and others expecting inflation to moderate. “Many firms raised selling prices indicating a greater ability to pass along cost increases to customers amid strong demand,” the Fed districts reported.

The report will do little to change the immediate course of Fed policy, with central bankers poised to begin reducing their $120 billion in monthly bond purchases as soon as next month after what most see as substantial improvement in the labor market since the end of last year.

But it could help shade discussions of what the Fed ought to do next, particularly as inflation has been running well above the Fed’s 2% target for the last several months.

Policymakers are keenly focused on the drivers of those price rises and whether they will, as most expect, recede next year.

If current high inflation persists, the Fed may need to start raising rates sooner than widely assumed, several policymakers have said recently.

Wednesday’s report showed companies in most districts were feeling price and wage pressures from supply chain bottlenecks as well as from labor constraints.

The Philadelphia Fed reported on one firm that was offering as much as “$90,000 for a second-year CPA position that might have commanded $65,000 before the pandemic.”

The Cleveland Fed said nearly 60% of its contacts reported raising wages recently, but with supply chains slowing production of goods, even that appeared not to be enough. One auto dealer, the district reported, noted that “supply chain disruptions were causing his labor challenges, adding, ‘nothing to sell makes it hard to keep employees.'”

A furniture retailer told the Boston Fed it had raised prices more than 30% since February 2021 to reflect increased shipping and materials costs.

The San Francisco Fed reported competition for talent and workers’ willingness to switch jobs as driving up wages, with one contact from the banking sector calling it “a wage war.”

Meanwhile, the increase in available workers that many employers expected to see as pandemic unemployment benefits expired and schools came back into session failed to materialize in many districts, the report showed.

(Reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Andrea Ricci)

Biden says inflation temporary; Fed should do what it deems necessary for recovery

By Steve Holland and Andrea Shalal

WASHINGTON (Reuters) -U.S. President Joe Biden on Monday said an increase in prices was expected to be temporary, but his administration understood that unchecked inflation over the longer term would pose a “real challenge” to the economy and would remain vigilant.

Biden said he told Federal Reserve Board Chair Jerome Powell recently that the Fed was independent and should take whatever steps it deems necessary to support a strong, durable recovery.

“As our economy comes roaring back, we’ve seen some price increases,” Biden said, while rejecting concerns the recent increases could be a sign of persistent inflation.

He said his administration was doing all it could to address supply chain bottlenecks that had pushed up the price of cars, and noted that lumber prices were now easing after spiking higher early in the recovery.

“I want to be clear: my administration understands that were we ever to experience unchecked inflation in the long term, that would pose a real challenge for our economy,” he said. “While we’re confident that isn’t what we’re seeing today, we’re going to remain vigilant about any response that is needed.”

Biden said he had also made that point clear to Powell: “The Fed is independent. It should take whatever steps it deems necessary to support a strong, durable economic recovery.”

Growing concerns about inflation dragged U.S. consumer sentiment in early July to its lowest level in five months, a survey showed Friday, after a 0.9% jump in consumer prices in June, the biggest increase in 13 years, but economists continue to believe that higher inflation is transitory.

The Democratic president said his plans to invest more in infrastructure, as well as better care for older people and children, would help reduce inflationary pressures in the future by boosting productivity.

“These steps will enhance our productivity, raising wages without raising prices,” he said. “It will take the pressure off of inflation, give a boost to our workforce which leads to lower prices in the years ahead.”

He said critics had warned repeatedly that his economic policies would lead to an end to capitalism, but economists were now predicting the United States would hit its highest economic growth rate in 40 years.

“It turns out capitalism is alive and very well,” he said. “We’re making serious progress to ensure that it works the way it’s supposed to work for the good of the American people.”

(Reporting by Steve Holland and Andrea Shalal; Editing by Andrea Ricci)

EU holds up Hungary’s recovery money in rule-of-law standoff

By Gabriela Baczynska

BRUSSELS (Reuters) -The European Union’s executive missed its own deadline to sign off on billions of euros in economic recovery aid to Hungary, delaying its decision in an attempt to win rule-of-law concessions from Budapest.

Hungary is set to receive 7.2 billion euros in EU stimulus funds meant to kickstart economic growth mauled by the coronavirus pandemic.

The funds will start flowing once the Brussels-based European Commission accepts national plans on how to spend them to ensure digital and green transitions, among others goals.

However, the Commission is using the money as leverage to push Hungary on its observance of the rule of law, an area where the increasingly authoritarian Prime Minister Viktor Orban has clashed with the EU.

A spokeswoman for the Commission said on Monday it was still analyzing the plan Budapest submitted and might propose a longer delay should it consider “months rather than days” were still needed to decide on it.

While the spokeswoman declined to give detail, the bloc’s Economics Commissioner Paolo Gentiloni said last week: “We are working on aspects to do with the respect for the rule of law.”

The Hungarian Prime Minister’s office said in a statement to state news agency MTI that talks with the Commission had been close to completion but that after Hungary’s law banning from schools materials seen as promoting homosexuality was passed, the European Commission came forward with what they said were “absurd demands”.

“The ideologically motivated political attacks obviously slow down the acceptance of the plan which was formulated earlier, in professional consultations,” the PM’s office said.

It added that talks were continuing with the Commission.

The Commission has long wanted Hungary to improve its public procurement process to combat “systemic irregularities” – or fraud.

Orban has also infuriated many of his EU peers in recent weeks with a new legislation that bans from schools materials seen as promoting homosexuality, the latest in a series of laws seen as discriminatory and restricting people’s rights.

Budapest has clashed with the EU on multiple occasions over Orban’s treatment of migrants and gay people, as well as the tightening of curbs around the freedom of media, academics and judges.

Orban portrays himself as a crusader for what he says are traditional Catholic values under pressure from the liberal West.

U.S. wholesale stocks rise solidly; inventories-to-sales ratio lowest in six years

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. wholesale inventories increased solidly in January even as sales surged and it is taking wholesalers the shortest time in six years to clear shelves, a sign of strengthening demand that aligns with expectations for faster economic growth this year.

The Commerce Department said on Monday that wholesale inventories rose 1.3% as estimated last month. Stocks at wholesalers gained 0.6% in December. The component of wholesale inventories that goes into the calculation of gross domestic product also increased 1.3% in January.

Inventories rose 0.6% in January from a year earlier. Sales at wholesalers jumped 4.9% after advancing 1.9% in December. At January’s sales pace it would take wholesalers 1.24 months to clear shelves. That was the shortest since November 2014 and was down from 1.29 months in December.

Domestic demand is picking up after hitting a pothole late in the fourth quarter, driven by declining COVID-19 infections and nearly $900 billion in additional pandemic relief from the government. Consumer spending rebounded sharply in January after slumping in November and December.

Spending is likely to accelerate further if Congress, as expected, approves President Joe Biden’s $1.9 trillion coronavirus relief plan. The bill, which was passed by the Senate on Saturday, will send one-time $1,400 checks to many low- and middle-income Americans as well as extend government-funded unemployment benefits for millions of people.

Economists estimate the economy could grow this year by as much as 7%, fueled by the massive fiscal stimulus and rollout of vaccines that are expected to get the pandemic under control. That would be the fastest growth since 1984 and would follow a 3.5% contraction last year, the worst performance in 74 years.

Businesses are replenishing inventories after they were drawn down early in the pandemic, helping to underpin manufacturing. But a big chunk of the inventory build is coming from imports, which could keep the trade deficit elevated.

The government reported last week that imports of goods raced to a record high in January. Wholesale stocks of motor vehicles and parts rebounded 1.2% in January. There were also increases in stocks of professional and computer equipment, as well as petroleum. Machinery inventory, however, fell.

Wholesale goods sales were boosted by the automotive, professional equipment, computer equipment, machinery and petroleum categories.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

George Floyd protests recall earlier tensions, promises of economic change

By Howard Schneider

WASHINGTON (Reuters) – In November 2015, the shooting death of Jamar Clark by Minneapolis police touched off a debate on race and economic inequality that challenged the city’s progressive image and led local corporate leaders to back efforts at better sharing the spoils of a booming Midwestern state.

Five years later, the killing of George Floyd has reopened those wounds and highlighted a growing concern nationally: The last few years of economic growth saw gains for lower-income families, but any hope for a durable narrowing of economic gaps may have been short-circuited by the coronavirus pandemic and the subsequent economic crash falling heavily on minorities.

Floyd’s death in police custody in Minneapolis last week may have been a catalyst for an anger that has spawned protests nationwide, but it was in effect the third major shock to hit in as many months, said Tawanna Black, chief executive of Minnesota’s Center for Economic Inclusion (CEI), a group that grew out of those corporate promises of five years ago.

Before the recent surge in joblessness, “we saw the employment gap closing rapidly,” Black said. But “you were connecting people to low-wage jobs, and now you have displaced them. … What I am hopeful of is that we not just solve for criminal justice, but what’s required to get economic and social justice.”

It is complex, to be sure. Tension over police treatment of blacks has simmered through good economic times and bad. But for the economy, the course of the pandemic and the financial fallout highlights how little has changed over a decade of growth that seemed to hold out at least the possibility of progress on narrowing racial economic divides.

Median family income growth finally started rising in 2015, but median family income for blacks remains about 61% that of whites. In Minneapolis, it is even lower at about 44%.

A 2009-2020 bull market for stocks and rising home values have done little to improve overall wealth among African Americans, who comprise around 13% of the U.S. population but account for 4.2% of household net worth, according to Federal Reserve data. The figure in 1989 was 3.8%.

For Hispanics, it is even worse, with more than 18% of the U.S. population holding just 3.1% of household wealth.

(Graphic: Race gaps persist – )

‘NO PROGRESS’

Both groups have suffered an outsized blow from layoffs triggered by business closures meant to control the spread of the coronavirus and the crash in demand among consumers holed up

at home.

According to federal data from February to April, Hispanic employment fell by more than 25%. For blacks, the figure was 17.6%, more modest but still above the 15.5% for whites.

It is part of a “last-hired, first-fired” dynamic familiar to labor economists and considered one of the reasons behind the lack of progress in narrowing wealth and income gaps. In this case, it is also driven by the skewed nature of the coronavirus economic shock, which hit hardest among lower-paid service jobs in the restaurant and hospitality industry where minorities form a larger share of the workforce.

The shock has been no different in Minnesota from in parts of the Deep South, according to a Reuters comparison of federal employment data by race alongside demographic information on unemployment claimants submitted by the state in April.

African Americans made up about 5.7% of Minnesota’s employed workforce in 2019 but more than 8% of those who filed for unemployment in April.

Still predominantly white, with a self-effacing culture captured by writer Garrison Keillor’s “Prairie Home Companion” former radio show, the demographics around Minneapolis, the state’s largest city, have shifted quickly in recent decades. It

has for example opened itself to refugees from Somalia. The city is now about 20% black and 10% Hispanic.

Minnesota’s rural areas voted heavily in 2016 for Republican Donald Trump, while the state as a whole went for Democrat Hillary Clinton owing to strong support in the Minneapolis area.

That city is also home to a healthy list of large U.S. companies, many of them homegrown national brands like Target Corp, that are known for their civic boosterism and support for efforts like the one spearheaded by CEI’s Black.

The question now is whether the dislocation caused by the coronavirus, rising joblessness and the death of Floyd prompts lasting change.

Those firms will be central to deciding the pace of the economic recovery, and the nature of the jobs available in the economy that emerges.

After the last recovery did so little to change wealth and income dynamics, and the coronavirus showed the gulf between workers who were buffered from the crisis and those who were not, Black said it was time to think about the nature of the labor market that will emerge from here.

Many of the jobs “will not come back. Do we train people for tech jobs? Automation-resilient jobs?” she said. Over the last decade, “we made no progress.”

(Reporting by Howard Schneider; Editing by Dan Burns and Peter Cooney)

Oil falls as spectre of China virus looms over fuel demand

By Julia Payne

LONDON (Reuters) – Oil prices fell on Thursday on concern that the spread of a respiratory virus from China could lower fuel demand if it stunts economic growth in an echo of the SARS epidemic nearly 20 years ago.

Brent crude futures  were down 88 cents, or 1.39%, at $62.33 a barrel by 1225 GMT, having earlier touched their lowest since Dec. 4. They lost 2.1% in the previous session.

U.S. West Texas Intermediate futures  fell 89 cents, or 1.57%, to $55.85 a barrel after earlier falling to the lowest since Dec. 3. The contract declined 2.7% on Wednesday.

On Thursday, China put on lockdown two cities that were at the epicentre of a new coronavirus outbreak that has killed 17 people and infected nearly 600, as health authorities around the world scrambled to prevent a global pandemic.

The potential for a pandemic has stirred memories of the Sudden Acute Respiratory Syndrome outbreak in 2002-03, which also started in China and dented economic growth and caused a slump in travel.

“Fundamentals are really being driven by virus fears. On a technical basis, there’s been a fight over the past six sessions but oil finally broke the 200-day moving average when it closed below that level yesterday,” said Olivier Jakob, of consultancy Petromatrix.

Cases have been detected as far as away as the United States and global stock markets were also down in part due to fears of the virus spreading further as millions of Chinese prepare to travel for the Lunar New Year.

Beijing said on Thursday that it had cancelled major public events, including two well-known Lunar New Year temple fairs, to curb the spread.

“We estimate a price shock of up to $5 (a barrel) if the crisis develops into a SARS-style epidemic based on historical oil price movements,” JPM Commodities Research said in a note.

The U.S. bank maintained its forecast for Brent to average $67 a barrel in the first quarter and $64.50 a barrel throughout 2020.

Amid all the demand concerns, however, supply remains plentiful.

U.S. crude stockpiles rose last week by 1.6 million barrels, against expectations of a drop, the American Petroleum Institute said late on Tuesday. [API/S]

Brazil also produced more than a billion barrels of oil in 2019, a first for the South American nation, the national oil regulator said on Wednesday.

China, meanwhile, released data on Thursday showing its gasoline exports rose nearly a third last year thanks to new refineries.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by David Goodman and Bernadette Baum)

Moderate U.S. consumer spending, inflation support rate cut

FILE PHOTO: A man shops at a store that sells parts and accessories for Recreational Vehicles (RVs) in Orlando, Florida, U.S., June 20, 2019. REUTERS/Carlo Allegri/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer spending and prices rose moderately in June, pointing to slower economic growth and benign inflation that could see the Federal Reserve cutting interest rates on Wednesday for the first time in a decade.

The report from the Commerce Department on Tuesday was released as officials from the Fed were due to gather for a two-day policy meeting against the backdrop of an uncertain economic outlook. The 10-year old economic expansion, the longest in history, is facing headwinds from trade tensions, fears of a disorderly departure from the European Union by Britain and weak global growth.

With those risks in mind, Fed Chairman Jerome Powell early this month signaled the U.S. central would ease monetary policy. A strong labor market and signs that the economy was not slowing abruptly, however, saw financial markets dialing back expectations of a 50 basis point rate cut on Wednesday.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, gained 0.3% as an increase in services and outlays on other goods offset a decline in purchases of motor vehicles.

Data for May was revised up to show consumer spending rising 0.5% instead of the previously reported 0.4% advance. Economists polled by Reuters had forecast consumer spending climbing 0.3% last month.

The data was included in last Friday’s second-quarter gross domestic product report, which showed consumer spending increased at a 4.3% annualized rate, accelerating from a tepid 1.1% pace in the January-March period.

U.S. financial markets were little moved by the data.

SAVINGS SURGE

Robust consumer spending blunted some of the hit to GDP from weak exports, business investment and a slowdown in inventory accumulation. The economy grew at a 2.1% rate last quarter, pulling back from the first quarter’s brisk 3.1% pace.

The economy is slowing largely as the stimulus from last year’s $1.5 trillion tax cut package fades.

Consumer prices as measured by the personal consumption expenditures (PCE) price index edged up 0.1% in June as food and energy prices fell. The PCE price index gained 0.1% in May. In the 12 months through June, the PCE price index rose 1.4% after a similar increase in May.

Excluding the volatile food and energy components, the PCE price index rose 0.2% last month, increasing by the same margin for a third straight month. That lifted the annual increase in the so-called core PCE price index to 1.6% from 1.5% in May.

The core PCE index is the Fed’s preferred inflation measure and has undershot the U.S. central bank’s 2% target this year.

When adjusted for inflation, consumer spending gained 0.2% in June. This so-called real consumer spending rose 0.3% in May. Last month’s small gain in core consumer spending likely sets up consumption for a step-down in the third quarter after the robust growth recorded in the April-June period.

Last month, spending on goods rose 0.3%. Spending on services also rose 0.3%.

Consumer spending in June was supported by a 0.4% rise in personal income, which followed a similar increase in May. Wages increased 0.5%. Savings shot up to $1.34 trillion from $1.31 trillion in May.

(Reporting Lucia Mutikani; Editing by Andrea Ricci)

Strong growth gives U.S. leverage in China trade talks-White House adviser

U.S. President Donald Trump talks to reporters as he departs for travel to Indianapolis, Indiana from the White House in Washington, U.S., April 26, 2019. REUTERS/Jonathan Ernst

By Jason Lange and Jeff Mason

WASHINGTON (Reuters) – Strong U.S. economic growth and modest inflation are giving Washington leverage over Beijing in trade talks, the White House’s top economic adviser said on Friday as U.S. and Chinese negotiators prepared for a new round of meetings next week.

Larry Kudlow, director of the White House’s National Economic Council, also said on CNBC television that strong growth could give the Federal Reserve room to cut interest rates.

He spoke after the Commerce Department reported that first-quarter U.S. economic growth accelerated to a 3.2 percent annualized rate, driven by a smaller trade deficit and a jump in business inventories.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are headed to Beijing for talks starting next Wednesday, while Chinese Vice Premier Liu He is scheduled to return to Washington on May 8.

“I hope additional progress will be made; I’m cautiously optimistic about the outcome for a deal,” Kudlow said of next week’s talks.

“China’s economy is slumping and has been slumping for quite some time,” Kudlow added. “The U.S. economy, as I say, is in this prosperity cycle with no end in sight. So we believe that does give us some leverage if you will, but we believe also that China may be open to a lot of good trade reforms.”

U.S. President Donald Trump on Friday repeated that China trade talks were “going very well,” a day after he said that he would soon host Chinese President Xi Jinping at the White House. Trump has said he expects to finalize a deal in a meeting with Xi.

Asked about prospects for a such a meeting on Fox News Channel, Kudlow said Trump would like to meet Xi and close a deal if it is “a great one for America. … We’re not there yet.”

The world’s two largest economies have been locked in a tariff war for nearly 10 months, levying hundreds of billions of dollars in duties on each other’s goods, and are trying to negotiate a way out.

The United States is demanding that China make major changes to its economic policies to better protect American intellectual property and end cyber theft of trade secrets and policies that force U.S. companies to turn over technology to Chinese firms.

Washington also wants Beijing to curb subsidies for Chinese state enterprises, increased access to China’s markets for U.S. companies and increased purchases of U.S. agricultural, energy and manufactured products by China.

China is seeking removal of U.S. tariffs on some $250 billion worth of Chinese goods imposed by Trump.

(Reporting by Jeff Mason and Jason Lange; Writing by David Lawder and Makini Brice; Editing by Chizu Nomiyama and Jonathan Oatis)

U.S. retail sales, jobless claims data brighten economic picture

FILE PHOTO: People walk with shopping bags at Roosevelt Field mall in Garden City, New York, U.S., December 7, 2018. REUTERS/Shannon Stapleton

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales increased by the most in 1-1/2 years in March as households boosted purchases of motor vehicles and a range of other goods, the latest indication that economic growth picked up in the first quarter after a false start.

The economy’s enduring strength was underscored by other data on Thursday showing the number of Americans filing applications for unemployment benefits dropped to the lowest in nearly 50 years last week.

Fears of an abrupt slowdown in activity escalated at the turn of the year after a batch of weak economic reports. But those concerns have dissipated in recent weeks amid fairly upbeat data on trade, inventories and construction spending that have suggested growth last quarter could actually be better than the moderate pace logged in the final three months of 2018.

A report from the Federal Reserve on Wednesday described economic activity as expanding at a “slight-to-moderate” pace in March and early April. The Fed’s “Beige Book” report of anecdotal information on business activity collected from contacts nationwide showed a “few” of the U.S. central bank’s districts reported “some strengthening.”

“Supported by strong labor market conditions and improving wage growth, household spending appears well positioned to increase in the coming months,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan. “Fears about the softening in the economy were overblown.”

The Commerce Department said retail sales surged 1.6 percent last month. That was the biggest increase since September 2017 and followed an unrevised 0.2 percent drop in February.

Economists polled by Reuters had forecast retail sales would accelerate 0.9 percent in March. Retail sales in March advanced 3.6 percent from a year ago.

With March’s rebound, retail sales have now erased December’s plunge, which had put consumer spending and the overall economy on a sharply lower growth trajectory. Retail sales last month were probably lifted by tax refunds, even though they have been smaller than in previous years, following the revamping of the U.S. tax code in January 2018.

Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 1.0 percent in March after a downwardly revised 0.3 percent decline in February. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

They were previously reported to have decreased 0.2 percent in February. Consumer spending accounts for more than two-thirds of economic activity and is being buoyed by a tightening labor market that is driving up wage growth.

STRONG LABOR MARKET

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 192,000 for the week ended April 13, the lowest level since September 1969. Claims have now declined for five straight weeks. Economists had forecast claims would rise to 205,000 in the latest week.

Though the trend in hiring has slowed, job gains remain above the roughly 100,000 needed per month to keep up with growth in the working-age population. The unemployment rate is at 3.8 percent, near the 3.7 percent Fed officials project it will be by the end of the year.

The dollar was trading higher against a basket of currencies while stocks on Wall Street were mixed. Prices of U.S. Treasuries were up.

March’s strong core retail sales could result in the further upgrading of first-quarter GDP estimates. Growth forecasts for the first quarter were boosted to around a 2.5 percent annualized rate on Wednesday after data showed the U.S. trade deficit narrowed for a second straight month in February.

First-quarter growth forecasts have been raised from as low as a 0.5 percent rate following relatively strong reports on trade, inventories and construction spending. The economy grew at a 2.2 percent pace in the fourth quarter.

Another report from the Commerce Department on Thursday showed business inventories rose in February and stock accumulation in the prior month was a bit stronger than initially estimated, a potential boost to growth.

Stronger growth in the first quarter will probably not change the view that the economy will slow this year as the stimulus from a $1.5 trillion tax cut package diminishes and the impact of interest rate hikes over the last few years lingers.

It also is unlikely to have any impact on monetary policy after the Fed recently suspended its three-year campaign to tighten monetary policy. The central bank dropped projections for any rate hikes this year after increasing borrowing costs four times in 2018.

In March, sales at auto dealerships jumped 3.1 percent, the most since September 2017. Receipts at service stations increased 3.5 percent, likely reflecting higher gasoline prices.

Receipts at clothing stores shot up 2.0 percent, the largest increase since last May. There were also increases in sales at furniture outlets, electronics and appliances shops, and food and beverage stores. Sales at building materials and garden equipment and supplies also rose last month.

Online and mail-order retail sales increased 1.2 percent in March. Sales at restaurants and bars climbed 0.8 percent, the most since last July. But receipts at hobby, musical instrument and book stores fell 0.3 percent last month.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Fed’s Williams expects further U.S. rate increases into next year

President and Chief Executive Officer of the U.S. Federal Reserve Bank of San Francisco, John Williams, gestures as he addresses a news conference in Zurich, Switzerland September 22, 2017. REUTERS/Arnd Wiegmann

By Jonathan Spicer

NEW YORK (Reuters) – One of the most influential Federal Reserve policymakers said on Tuesday he expects further interest-rate hikes continuing next year since the U.S. economy is “in really good shape,” reinforcing the Fed’s upbeat tone in the face of growing doubts in financial markets.

Even as New York Fed President John Williams told reporters he expects the U.S. expansion to carry on and surpass its previous record around mid-2019, stock markets headed lower Tuesday morning while a potentially worrying trend of “inversion” continued to grip Treasury markets.

The Fed is expected to raise its policy rate another notch this month and, according to policymakers’ forecasts from September, aims to continue tightening monetary policy three more times next year. Futures markets, however, are betting a slowdown overseas and in sectors like U.S. housing will force the Fed to stop short.

Yet Williams, a permanent voter on policy and close ally of Fed Chair Jerome Powell, said lots of signs point to a “quite strong” and healthy labor market, and he predicted economic growth of around an above-potential 2.5 percent in 2019.

“Given this outlook I describe of strong growth, strong labor market and inflation near our goal – and taking into account all the various risks around the outlook – I do continue to expect that further gradual increases in interest rates will best foster a sustained economic expansion and a sustained achievement of our dual mandate,” Williams said at the New York Fed.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)