According to a report by the Census Bureau, retail sales in September saw a significant 0.7% increase. This growth was driven by higher spending at nonstore retailers and food and drinking establishments. Total spending reached $704.9 billion, up from the revised August figure of $699.9 billion, which itself marked a 0.8% increase. Analysts had expected a more modest 0.3% monthly gain. Even when excluding automotive sales, a metric used by some analysts, the increase remained strong at 0.6%, surpassing the estimated 0.2% gain. This data also indicates that consumers are managing to stay ahead of inflation.
“Despite low consumer sentiment and numerous economic concerns, this report doesn’t indicate that a recession is near,” said Ted Rossman, senior industry analyst at Bankrate.com. “Consumer spending remains remarkably resilient and is accelerating in discretionary categories such as dining and big-ticket items such as new cars.”
The impressive performance of retail sales, while beneficial for the economy, places additional pressure on the Federal Reserve as it convenes to discuss interest rates. In September, the central bank decided to hold steady, but it continues to grapple with inflation concerns, given that consumer prices still remain well above the Fed’s targeted annual rate of 2%.
The resilience of consumers can be attributed to the robust job market. In September, employers added 336,000 jobs, surpassing expectations, and wages increased at a rate slightly exceeding 4% annually, according to data from the Labor Department. As long as these positive trends persist, consumers are likely to feel confident in their ability to sustain their spending habits.
“Consumer spending has been fairly flat over the last two months,” according to Bank of America Institute’s Consumer Checkpoint October report. “Seasonally adjusted total card spending rose 0.2% month-over-month, reversing the 0.2% decline in August. Total card spending per household was up 0.7% year-over-year in September, compared to 0.4% in August.”
“The labor market is key for the consumer,” Bank of America said. “While there has been a relative deterioration in labor conditions at the higher end of the market, most of that underperformance may now be in the past. However, the wages and salaries of higher-income households are still growing at slower rates than other income cohorts.”