U.S. retail sales increased slightly more than expected in September, supporting views that the economy maintained a strong pace of growth in the third quarter.

Retail sales rose 0.4% last month after an unrevised 0.1% gain in August, the Commerce Department's Census Bureau said on Thursday. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, would rise 0.3%.

Estimates ranged from no change to an increase of 0.8%.

Signs of the economy's resilience likely will not discourage the Federal Reserve from cutting interest rates again next month, but will cement expectations for a smaller 25-basis-point reduction in borrowing costs.

The U.S. central bank embarked last month on its easing cycle with an unusually large half-percentage-point cut in its policy rate, lowering it to the 4.75%-5.00% range, amid growing concerns about the labor market. The Fed hiked rates by 525 basis points in 2022 and 2023 to curb inflation.

Spending and the overall economy are being underpinned by solid income growth, ample savings as well as strong household balance sheets. Though labor market momentum has slowed, layoffs remain historically low, supporting wage gains.

"As we have long argued, consumer spending, net hiring, and payroll income have been locked in a resilient and self-reinforcing virtuous cycle throughout this expansion, supercharged by gains in household wealth and labor supply," said Jonathan Millar, senior U.S. economist at Barclays.

"Durable deterioration in consumer spending would require something to meaningfully undermine this cycle, such as increased precaution by consumers that lifts the saving rate or reluctance to hire by businesses, despite solid demand."

Retail sales excluding automobiles, gasoline, building materials and food services increased 0.7% last month after an unrevised 0.3% rise in August. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Growth estimates for the third quarter are around a 3.2% annualized rate. The economy grew at a 3.0% pace in the second quarter.

(Reporting by Lucia Mutikani; Editing by Paul Simao and Chizu Nomiyama)