WASHINGTON, Oct 12: US retail sales, a crucial motor of economic growth, rose a stronger-than-expected 0.6pc last month as American consumers boosted their spending, a government report showed on Friday.

Excluding vehicle sales, the Commerce Department said retail sales rose an improved 0.4pc in September.

The latest readings on consumer spending defied expectations as most economists were anticipating a tepid 0.2pc rise in overall sales and a 0.3pc increase in sales excluding autos.

“The retail sales report suggests we have a pretty healthy US consumer, despite all headwind related to housing,” said Drew Matus, an economist at Lehman Brothers.

Other economists said the report, which bolstered gains on US stock markets, lessened the odds the Federal Reserve would implement fresh interest rate cuts later this month.

The report yielded the strongest reading on retail sales since July.

Sales surged compared with August, when retail sales grew a lacklustre 0.3pc, suggesting Americans have not lost their legendary appetite for spending despite a national housing downturn which has dented home values in many regions.

Economists have been watching retail activity closely amid fears consumers would cut back their spending because of the housing slump and a related credit squeeze which has forced many banks to tighten their lending practices.

The Federal Reserve slashed borrowing costs last month in the face of the housing and credit turmoil and the drop in short term interest rates may have offered consumers some relief.

The central bank cut its key short term federal funds interest rate by half a percentage point to 4.75pc on September 18, lowering consumer borrowing costs in the world’s biggest economy.

Economists are divided on whether the Fed will trim rates further at a meeting scheduled for the October 30-31, but several said the likelihood of further cuts had been reduced by the retail snapshot.

“The markets will likely treat it as a good report and the Fed has no choice but to do the same. As a consequence, the chances of a Fed ease on October 31 seem to be fading,” said Joel Naroff, president of Naroff Economic Advisors.

Naroff cautioned, however, that there could be some hefty revisions to the retail picture next month as many retailers have reported sluggish sales.

“The Federal Reserve has no motivation to cut rates on current economic activity. This report further reduces odds of additional rate cuts, but the Fed will continue to monitor financing conditions and the risks that restrictive credit poses for the economy,” economists at Societe Generale said in a note to clients.

Breaking down the government report, vehicle sales rose 1.2pc in September compared with a 3.3pc rise the prior month.

US auto manufacturers reported mixed sales for September amid economic uncertainty. Ford Motor Co. fared particularly badly as its sales fell 21pc. Other sectors presented a mixed picture.

Gasoline station sales rebounded 2.0pc compared with a 2.6pc decline in August, as turnover at furniture and home furnishing stores declined 0.6pc against a 0.1pc drop in the prior month.

Electronic and appliance store sales increased 0.9pc against a 0.8pc gain in August and restaurant and bar sales remained flat.

Clothing sales dropped 0.4 per cent in September following a 0.2 per cent decline in the prior month, but economists largely attributed this to unseasonably warm weather.—AFP