- Retail sales fell by 0.3% in September, the opposite sign expected by the median consensus forecast (a +0.3% gain). Sales in the month prior however, were revised up from 0.4% to 0.6%.
- The decline was wide-spread, with sales in most categories deteriorating on the month. Among the more volatile groups, food services & drinking places (+0.2% m/m) were the only category to record an increase in September, with sales pulling back notably at autos & parts dealers (-0.9%), gasoline stations (-1.0%) and building material & garden equipment stores (-0.7%).
- Sales in the retail sales “control group”, which excludes the aforementioned volatile components (gas, autos, building materials and food services), came in flat, disappointing expectations for a 0.3% gain.
- The flat print in the control group masked a mixed performance among the underlying subcategories. Sales were up in clothing (+1.3%), health stores (+0.6%), furniture (+0.6%) and miscellaneous stores (+0.5%), but fell in the remaining categories, including non-store retailers, which recorded its first monthly drop since last December.
- On a quarterly basis, despite a mild deceleration, sales continued to sport strong gains. Retail sales and food services were up 6% annualized in the third quarter, from 7.7% in the second quarter, whereas control group sales came in at 6.8% and 7.9% respectively.
Key Implications
- American shoppers tightened the purse strings and pulled back on their spending in September. The weak performance, both at stores and online, is disappointing, but has to be put in the context of a strong six-month run.
- The latest data leaves our tracking for third-quarter consumption at just shy of 3% annualized – a slowdown from the second quarter, but still a solid print, with consumption among the brightest spots in the economy.
- The September retail sales print provides a soft handoff to fourth quarter consumption. Lower interest rates and a still-solid employment backdrop should continue to offer support, but with many important trade decisions to be made in the homestretch of the year (i.e. with respect to China and the EU), the confidence channel remains a wild card.
