U.S. retail and food services sales jumped 0.4% in September, reaching $714.4 billion, according to the latest advance estimates. This marks a significant acceleration from the 0.1% rise seen in August and represents the fourth-best month for sales so far this year.
- For the third time in the last four months, sales growth outpaced the rise in prices, highlighting the resilience of American consumers despite inflationary pressures.
Slowing Growth: Sales in September were up 1.7% compared to the same time last year, though this represents a slowdown from the 2.0% annual growth reported in August. This is the second-lowest year-over-year increase of 2024, showing that while consumers are still spending, the pace has moderated.
Breaking It Down: Miscellaneous retailers saw the biggest gains, with a 4.0% increase in sales just in September. Clothing stores followed with a 1.5% rise, while both restaurants and grocery stores recorded 1.0% increases from August.
- In contrast, electronic stores experienced a sharp 3.3% decline in sales, making them the month’s biggest laggard. Gas station sales dropped 1.6%, influenced by falling oil prices, while furniture store sales fell 1.4%.
What They’re Saying: Joseph Brusuelas, Chief Economist at RSM US LLP, highlighted the strong consumer spending figures on social media, noting, “US Retail Sales: adjusted for inflation topline & the control group that feeds into the estimate of GDP are both 0.5% m/m. On a three-month average annualized pace it’s 5.2% & 7.5%. Again the American consumer is in a very good place.” Brusuelas emphasized that these figures suggest a healthy consumer sector, reinforcing expectations that the Federal Reserve could implement a 25 basis point rate cut at its November 7 policy meeting.
Inflation Problem: Despite the positive retail numbers, inflation remains a challenge. For the seventh time this year, retail sales did not keep pace with the annual rise in prices. This suggests that while sales are growing, the overall purchasing power of consumers may be under pressure. However, September’s data indicates a slight shift, with monthly sales growth surpassing price increases.
The Bottom Line: September’s robust retail sales underscore the resilience of U.S. consumers in the face of rising prices, with strong performances in several key categories. While challenges remain, the data points to a healthy consumer sector, which may encourage the Fed to adjust its policy stance. All eyes will now be on the Fed’s November meeting, as markets look for clues on the future path of interest rates.
