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September’s Flat Retail Sales Data Doesn’t Tell Whole Story

Nothing’s slowing the American consumer’s propensity to spend—at least, not yet.

The U.S. Census Bureau’s U.S. retail sales date for September was unchanged from $684.0 billion in August. Retail trade sales were down 0.1 percent from August 2022, but up 7.8 percent from a year ago. Those data points suggest that consumer spending is slowing down, particularly against the backdrop of rising inflation and interest rates. Digging deeper under the hood, retail sales actually rose 0.3 percent after excluding the 1.4 percent decline in gasoline sales and a 0.4 percent dip in sales at auto dealers.

Sales at apparel and accessories stores in September were flat at $26.23 billion from $26.11 billion in August, seasonally adjusted but not for inflation. Department store sales slipped 1 percent to $11.57 billion from $11.42 billion. Sales at nonstore retailers, essentially online retailers, rose 1 percent to $109.25 billion from $108.67 billion. Sales at furniture and home furnishings retailers fell 1 percent to $12.02 billion from $12.11 billion.

“Consumer goods purchases are slowing, but not collapsing,” Wells Fargo economists Tim Quinlan and Shannon Seery wrote in a report on Friday. “Inflation-adjusted retail sales have more or less moved sideways for the past year and a half; an impressive feat when inflation is running at a 40-year high.”

The economists said some of the slowdown in spending at retail is being offset by spending for services. One hint from September’s retail sales report is the 0.5 percent increase in food services, or sales at restaurants. They also said that goods spending should get a near-term boost as consumers begin holiday shopping. October data should reflect the uptick as retailers from Amazon to Target have started their promotions this month, they added.

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Naveen Jaggi, president of JLL’s Retail Advisory Services, also expects to see strengthening retail sales when the data comes in next month.

“Although retail spending was flat in September, the slight gains from last month in general retail categories indicate consumers are saving their money on bigger ticket items such as travel, furniture and electronics as we approach the holidays,” Jaggi said. “With Halloween and Thanksgiving around the corner, we can expect consumers to start their holiday shopping, and, despite inflation, we anticipate a slight increase in sales for October.”

Jack Kleinhenz, chief economist for The National Retail Federation (NRF), said the consumer demand held up during September. “But sales were uneven across retail categories and inflation is the main factor that is determining how much shoppers are willing to spend. Households are tapping into savings, accessing credit and reducing their savings contributions as they meet higher prices head on,” he said.

Matthew Shay, president and CEO of the Washington, D.C.-based trade group, said the retail sales data show that even with rising interest rates, persistent inflation, political uncertainty and volatile global markets, consumers seem largely undeterred from spending. “As we enter the holiday season, shoppers are increasingly seeking deals and discounts to make their dollars stretch, and retailers are already meeting this demand,” Shay said.

He went on to say the Biden administration “must” enact policy measure to lower costs for American families. Dropping China tariffs, advancing smart immigration reform to address the labor shortage, and increasing investments in supply chain resiliency will also have an immediate impact on consumers, Shay added.