Retail Sales Increase 0.7% in September, Beat Estimates

Consumers showed surprising strength in September, boosting retail sales well above expectations despite high interest rates and worries over a weakening economy. Retail sales rose 0.7 percent on the month, well above the 0.3 percent Dow Jones estimate, according to the advance report the Commerce Department released Tuesday. Excluding autos, sales were up 0.6 percent, also well ahead of the forecast for just 0.2 percent. The numbers are not adjusted for inflation, so they indicate that consumers more than kept up with price increases. The consumer price index, released last week, showed headline inflation up 0.4 percent in September. On a year-over-basis, sales rose 3.8 percent, compared with the 3.7 percent increase for the CPI.

Total Retail's Take: Some positive momentum for retailers heading into the critical Q4 holiday shopping season. Here are thoughts from industry analysts on what retailers can take from the encouraging September sales numbers.

• Kayla Bruun, Senior Economist, Morning Consult: "September's retail sales were considerably stronger than expected, with broad-based gains across most categories. Price relief from softer core inflation is helping to blunt the negative impact of elevated gas prices and interest rates on spending, with consumers reporting less sticker shock in September. However, Morning Consult’s data suggests consumers’ appetite for nonessential spending may be cooling off along with the weather, with U.S. households increasingly focusing on shoring up finances and paying off debts."
• David Silverman, Senior Director, Fitch Ratings: "The U.S. consumer rolls along, as September retail sales excluding auto and gas were reported up 4 percent compared with September 2022, similar to recent results and suggesting flattish volumes. A growing sea of headwinds, including inflation, rising interest rates, reduced consumer savings, and the specter of resumed college loan payments have dominated consumer sentiment discussions and while some discretionary categories like furniture and consumer electronics remain pressured, overall spending has remained relatively consistent and above prior year levels. Fitch expect flattish to modestly down volume trends over the next six [months] to 12 months, with discretionary categories more volatile given growing headwinds and continued shifts in spending patterns, which have recently benefited services like travel and entertainment."