Consumers have displayed remarkable resilience, propelling retail sales in September well beyond expectations despite rising interest rates and concerns about a weakening economy.
The Commerce Department’s advance report reveals that retail sales increased by 0.7% for the month, surpassing the Dow Jones projection of 0.3%. Gas station sales played a role in boosting the headline number, rising by 0.9% as pump prices increased.
Excluding automobile sales, retail sales increased by 0.6%, surpassing the expected growth of 0.2%. The “control group,” a category used to calculate the department’s GDP figures, which excludes gas stations, office supply stores, mobile homes, auto dealers, and tobacco shops, also saw a 0.6% increase.
These figures indicate that consumers not only coped with rising prices but exceeded them, as the data does not account for inflation. In September, inflation, as measured by the Consumer Price Index, increased by 0.4%.
Comparing these numbers to the 3.7% increase in the CPI, retail sales showed a year-over-year increase of 3.8%.
Retail sales for the month were diversified, with miscellaneous stores seeing the most significant increase at 3%. Online sales increased by 1.1%, while dealers and auto parts experienced 1% growth, and dining and drinking establishments saw 0.9% growth.
However, a few categories saw declines, with apparel merchants and stores selling electronics and appliances both experiencing 0.8% monthly drops.
The retail sales report is closely monitored by the Federal Reserve as officials deliberate on the future of monetary policy. While most markets anticipate the Fed will cease raising interest rates during this cycle, a remarkably robust consumer base complicates the equation.
Despite predictions of a slowdown in employment growth, credit card balances are increasing, and the start of student loan payments is expected to impact spending. However, third-quarter economic growth is anticipated to remain strong. Following the release of the retail sales data, Goldman Sachs has revised its economic forecast, now projecting GDP to accelerate at a 4% annualised rate in the third quarter.