In a promising sign of enduring consumer demand, U.S. retail sales for September surpassed expectations, underscoring the resilience of households as the third quarter came to a close.
The Commerce Department reported that the value of retail purchases, not adjusted for inflation, saw a substantial 0.7% increase following an upwardly revised 0.8% gain in August. Excluding gasoline, sales in September also advanced by 0.7%.
Especially noteworthy were the «control group sales,» a metric used to calculate gross domestic product (GDP), which exclude food services, auto dealers, building materials stores, and gasoline stations. These sales exceeded expectations, rising by a solid 0.6%.
Throughout the third quarter, control group sales achieved an annualized growth rate of 6.4%. Purchases surged in eight out of 13 categories last month, including increased receipts at restaurants, motor vehicle dealers, and personal care stores.
This robust performance showcases the strength of consumer spending, despite recent energy-driven increases in inflation. Although wage growth is beginning to taper, the overall labor market remains resilient, giving Americans the flexibility to sustain their spending habits.
These positive data support expectations of stronger economic growth in the third quarter.
However, the continued vigor of consumer demand, particularly in light of persistent inflation, poses a potential challenge for Federal Reserve policymakers, who may consider raising interest rates before the year’s end.
In response to this report, Treasury yields and the dollar experienced an uptick, while U.S. stock futures remained subdued, reflecting increased speculation about another Fed rate hike.
Recent government data confirmed a brisk increase in consumer prices for the second consecutive month in September, underscoring the lingering nature of inflation. Another report highlighted an unexpected rise in prices paid to U.S. producers last month.
While inflation remains notably above the Fed’s 2% target, certain key consumer goods, such as apparel and furniture, saw significant price drops last month. These price declines help explain the modest receipts at clothing retailers and appliance merchants in September, with apparel store sales witnessing a 0.8% decline, marking their first decrease in six months.
It’s important to note that these retail figures primarily reflect spending on merchandise. Real spending on both goods and services for September will be released later this month.
Within the retail sales report, purchases made at restaurants and bars, the sole service-sector category mentioned, increased by a substantial 0.9% last month. Meanwhile, receipts at grocery stores rose by 0.4%.
In a particularly positive development, sales of motor vehicles surged by 1% in September, marking the largest gain in four months.
