The U.S. consumer spending machine turned into a September surprise.
U.S. retail sales unexpectedly rose 0.7 percent in September to $625.4 billion, excluding automobile sales, as consumers kept opening their purse strings. That’s despite expectations for a slowdown following a decline in September’s Consumer Confidence Index. The Index has been on the decline for three months in a row. Overall retail sales rose 13.9 percent compared with year-ago figures, also excluding automobile sales.
According to data from the U.S. Census Bureau, retail trade sales rose 0.8 percent from August 2021, and were up 12.2 percent from year-ago results. Apparel and accessories stores saw a 1.0 percent rise in September to $26.15 billion from $25.87 billion in August, while department store sales also gained 1.0 percent to $12.56 billion from $12.45 billion. Sales at nonstore retailers, which includes e-commerce, rose 1.0 percent to $89.29 billion from $88.75 billion. Sales at furniture and home furnishings stores were essentially flat at $12.298 billion from $12.273 billion.
Despite the slight uptick shown by apparel stores and the department store sector, it was sporting goods, music and book store sales that led the way in September, up 4.0 percent to $9.28 billion from $8.95 billion.
The return of some workers to their offices and students at the classrooms saw a boost in apparel and department store sales in August, at 38.8 percent and 29 percent, respectively. September’s sales gains were not as high, but there’s been more talk in recent weeks about supply chain shortages and the need for an early start to holiday shopping, which could have helped to give retail sales the unexpected shot in the arm. Whether that will continue to foster sales growth in October remains to be seen. Or, it may result in another boost in sales for October, with a possible slowdown later on.
Naveen Jaggi, president of retail advisory services JLL believes that consumers could already have begun their holiday shopping.
“JLL’s recent holiday survey results reveal more than half of shoppers will start shopping before Thanksgiving, compared to 43.2 percent last year,” Jaggi said.
He added that with supply chain disruptions at hand, along with labor shortage and congestion at the ports, his firm has been encouraging retail clients to make consumers aware of the challenges during this holiday season and to plan accordingly.
“As a result, more consumers will plan ahead for this holiday season and we should expect October retail sales to continue to grow,” he said, adding that according to JLL’s holiday survey, “affordable goods are top of mind, so we can expect consumers will shop at mass merchandisers and department stores.”
Wells Fargo Securities economists Tim Quinlan and Shannon Seery expect a spending slowdown could occur when final figures are tallied for the third quarter, especially when looked at through an inflation-adjusted lens.
“Despite wilting expectations for economic growth, today’s better-than-expected retail sales report is a reminder that while retailers still face supply chain and other problems, consumers are still flush with cash and ready to spend. That said, the better-than-expected outcome needs to be taken in the context of sharply higher prices for many consumer goods in an environment where scarcity, shortages, and ‘out of stock’ signs have become a regular part of the post-COVID retail landscape,” they said in a report Friday.
Quinlan and Seery noted that holiday sales could remain on track for a banner year, provided that stores can keep merchandise in stock. With new Covid cases on the decline, and more cruise ships out and about for the fifth straight month, consumers still have the itch to resume their social schedules. That could bode well for another increase in retail sales in October, the economists said.
The National Retail Federation (NRF) said September’s results illustrate shoppers’ continue desire to spend.
“Today’s retail sales data confirms the sheer power of the consumer to spend, and we expect this to continue,” NRF President and CEO Matthew Shay said. “Despite persistent challenges related to the global pandemic, supply chain and labor shortages, retailers and their partners have shown resilience and ingenuity in getting the workforce, goods and systems in place to serve their customers and the communities where they operate. We welcomed the chance to collaborate with the Biden administration and industry partners this week to address supply chain and labor force issues. We have seen record imports this year and are confident that collectively we can work through these challenges to ensure a healthy and happy holiday season.”
NRF chief economist Jack Kleinhenz noted that consumer spending “hit a speed bump toward the end of summer.”
“Consumers remained active, but retail sales didn’t reflect as much of a shift away from goods to services as expected. That was a plus for retail because consumers still have a hyper-ability to spend thanks to wage and job gains and the household savings built up during the pandemic,” he added. “In addition, some back-to-school spending may have spilled over from August into September because of school districts that delayed opening until after Labor Day. Overall, the September report is very promising for a strong finish for the year. Nonetheless, rising inflation and slower supply chains remain a concern. Spending might have been higher if not for shortages of items consumers are eager to purchase.”