Retail Spending Was Flat in September Amid High Inflation

Retail sales – which include consumer spending mostly on goods like furniture, vehicles and groceries but also on restaurants – were flat last month from August, compared with a revised 0.4% increase in August from July, the Commerce Department said on Friday .

Retail sales excluding gasoline and autos rose 0.3% mom in September. Sales at gas stations, an indicator of car owner spending, fell 1.4% last month from August but remained 21% higher year-on-year.

Gasoline prices fell for the third straight month in September, down 4.9% from August. Nevertheless, they have risen by more than 18% compared to the same month last year. The average cost of a gallon of regular unleaded gasoline was $3.90 as of Friday, according to AAA/OPIS. That’s down from a June high of just over $5 a gallon.

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Spending fell in categories associated with major purchases such as cars, televisions, beds and golf clubs. Purchases at electronics and appliance stores fell 0.8% in September, while spending at furniture stores fell 0.7%.

At the start of the pandemic, consumers bought new dishwashers and patio furniture as they shifted spending to produce and away from vacations. This trend has reversed somewhat in recent months.

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Sales have fluctuated but have generally risen in recent months as higher prices and rising interest rates can make larger purchases more expensive. High inflation means consumers are getting less for what they spend. Consumer prices rose 0.4% in September compared to August, while retail spending was flat.

“Retail sales are strong because prices are rising fast,” said Chris Varvares, co-head of US economics at S&P Global Market Intelligence.

A series of rate hikes has swept the US economy and more are forecast to follow. The WSJ breaks down the numbers hitting Americans’ wallets this year and beyond. Photo: Elise Amendola/Associated Press

Consumer prices rose 8.2% overall in September from the same month last year, dragged down by a fall in gasoline prices partially offset by higher food costs, the Labor Department said in a separate report on Thursday.

Contrary to many government reports, retail sales are not adjusted for inflation, so some fluctuations reflect price changes rather than shifts in quantities purchased. Higher interest rates also make buying on credit more expensive.

Shoppers spent more at stores selling must-haves like dinner ingredients and shampoo. They also boosted online purchases.

Spending at restaurants and bars rose 0.5% mom in September. However, restaurant prices rose 0.9% in the same month, meaning consumers are getting less for their spending, according to a separate Labor Department report released on Thursday.

A challenging housing market has weighed on residential construction.


Photo:

Adolphe Pierre-Louis/Zuma Press

Scott Brave, the head of economic analysis at Morning Consult, said consumers have begun to back away from optional purchases while still spending on essentials.

“They have difficult decisions to make,” he said.

A challenging housing market has weighed on housing construction this year. The number of housing units starting construction has declined in recent months from the spring highs. Spending in stores selling lumber and plumbing by both professionals and consumers fell 0.4% in September.

Year-on-year spending was broadly in line with the annual rate of inflation. Total retail sales rose 8.2% year-on-year in September.

Retailers introduced Christmas sales earlier this year to shed excess inventory. Amazon.com inc,

target corp

and Walmart inc

recently launched the sale. These events are not reflected in Friday’s report, which covers transactions in September.

Richard Moody, chief economist at Bank Regions Financial corp

, said the September sales figures are unlikely to influence Federal Reserve interest rate decisions. Discounts by retailers could start showing up in inflation and sales data in the coming months, he said, particularly ahead of the holiday season.

“They’re past the big back-to-school expenses,” he said. “Christmas shopping really ramps up later in the year.”

According to University of Michigan surveys, consumers remain gloomy about the economy, with many blaming inflation for the deterioration in their financial condition. Although consumer sentiment has improved in recent months, it remains subdued, partly on inflation concerns.

The preliminary estimate of the consumer sentiment index released by the University of Michigan on Friday came in at 59.8 in October, up from 58.6 in September, the highest since April. Sentiment is now 9.8 points above the all-time low hit in June.

Amilcar Caputo, who works at a Minnesota food manufacturer, said he recently started buying skirt steaks instead of rib-eye cuts after prices went up.

“I’m Brazilian. I love to grill. Meat is a big thing,” he said. “I had to look for other options.”

Write to Austen Hufford at [email protected]

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