Mild gains for September retail sales, Commerce and NRF data show

September brought another month of modest retail sales gains, according to data respectively issued today by the U.S. Department of Commerce’s Census Bureau and the National Retail Federation (NRF).

Commerce reported that total September retail sales, at $704.9 billion, increased 0.7%, from August to September, and posted a 3.8% annual gain. Total retail sales, from July through September, increased 3.1% compared to the same period a year ago.

Retail trade sales rose 0.7% over August and were up 3.0% annually, according to Commerce data. And non-store retail sales, which includes e-commerce, headed up 8.4% annually.

NRF reported that September retail sales, which does not include automobile dealers, gasoline stations, and restaurants, increased 0.5% on a seasonally-adjusted basis over August, and rose 2.2% on an unadjusted basis annually. On a three-month moving average, NRF said retail sales were up 3.2% through August and up 3.8% on a year-to-date basis through August.

NRF officials explained that its September numbers increased 3.1% on an unadjusted basis annually on a three-month moving average through September, while posting a 3.7% increase through the first nine months of 2023.

“The consumer is still healthy, and today’s report shows households are forging ahead with plenty of buying power despite persistent inflation, rising interest rates and geopolitical conflicts,” NRF Chief Economist Jack Kleinhenz said in a statement. “Firm payroll growth over the past few months has likely helped spending across retail sectors. However, much of the rise was due to car sales, gasoline prices and food services. When you exclude those categories and look at core retail as measured by NRF, the pace of year-over-year growth is slowing.”

In the August Monthly Economic Report, Kleinhenz observed that even though U.S. consumers are buying more than they were a year ago at this time, growth in spending is slowing down, as does the economy amid the aforementioned higher interest rates focused on lowering inflation.

“The economy was clearly more resilient in the first half of this year than many expected, and the consumer environment has been positive as inflation has slowed,” Kleinhenz observed. “Nonetheless, there are ongoing economic challenges and questions, and the pace of consumer spending growth is becoming incrementally slower. Consumers are still spending but are under financial pressure and have been adjusting how much they buy while also shifting from goods to services. While job and wage gains have counterbalanced inflation, the stockpile of savings accumulated during the pandemic is dwindling and is no longer providing as much spending power as previously available.”

NRF data pointed to September retail sales gains in five of the nine retail sectors it tracks, including:

• Health and personal care stores were up 0.8% month over month seasonally adjusted and up 7.3% unadjusted year over year;
• Online and other non-store sales were up 1.1% month over month seasonally adjusted and up 6.2% unadjusted year over year;
• General merchandise stores were up 0.4% month over month seasonally adjusted and up 3% unadjusted year over year;
• Grocery and beverage stores were up 0.4% month over month seasonally adjusted and up 2.1% unadjusted year over year;
• Clothing and clothing accessory stores were down 0.8% month over month seasonally adjusted but up 0.8% unadjusted year over year;
• Sporting goods stores were unchanged month over month seasonally adjusted but down 1.6% unadjusted year over year;
• Electronics and appliance stores were down 0.8% month over month seasonally adjusted and down 2.5% unadjusted year over year;
• Furniture and home furnishings stores were unchanged month over month seasonally adjusted but down 6.5% unadjusted year over year; and
• Building materials and garden supply stores were down 0.2% month over month seasonally adjusted and down 6.5% unadjusted year over year

Neil Saunders, Managing Director of GlobalData, wrote in a research note September represented another reasonable month for retail sales.

“As a bonus, last month’s numbers were also upgraded by 0.5 percentage points,” he wrote. “While the numbers have softened since the start of this year, and are much weaker than last year, they are still coming in around the long-term average for growth. However, compared to pre-pandemic years the difference now is that much of the growth is still being driven by inflation and when this is considered volumes are down by 0.5% this month. That’s a slightly sharper contraction than last month.

While the headline number is holding up well, the core retail sales number – which excludes gasoline, automotive, and foodservice – is weaker. This month, core retail sales expanded by a modest 2.2% which is the weakest pace of growth since April’s 1.2%, and significantly below the long run average growth rate. This perhaps indicates some early signs of consumer distress; however, it could also be a function of consumers delaying spending in anticipation of the bargains and deals available in October’s various deal days. From our consumer panel, 36% of consumers said they had put off at least some discretionary purchases in September in the hopes of getting a discount in October.”