Retail sales ended the third quarter with a bang, increasing 1.6 percent in September. This will give a boost to personal consumption expenditures, which started the third quarter on a weak note.
Strong Auto Sales Drive September Retail Growth
Retail and food services sales surged 1.6 percent in September, a bit slower than the 1.7 percent estimated by consensus but still very strong to close the third quarter on a positive note. Excluding automobile sales, which surged 3.6 percent during the month, retail and food services sales also increased a strong 1.0 percent compared to August. Meanwhile, gasoline sales also rose strongly, up 5.8 percent during the month as gasoline prices increased considerably due to the effects of the hurricane in Texas that affected some refineries in the Houston region.
Another strong sector of retail in September was building material & garden equipment & supplies dealers, which increased 2.1 percent in the month. On the other hand, food & beverage stores sales were up 0.8 percent with grocery store sales improving 1.0 percent. Clothing & clothing accessories stores sales inched up 0.4 percent while general merchandise stores sales were up 0.3 percent. However, within general merchandise stores sales, department store sales were lower once again, this time by 0.4 percent. Miscellaneous store retailers’ sales were also down in the month, by 0.6 percent. Other weak sectors during September were sporting goods, hobby, book & music stores’ sales, down 0.2 percent; health & personal care stores’ sales, down 0.4 percent; electronics & appliance stores’ sales down 1.1 percent and furniture & home furniture stores’ sales down 0.4 percent.
Meanwhile, non-store retailers’ sales were up 0.5 percent in the month while on the service side of the retail report, food services & drinking places’ sales increased 0.8 percent.
Overall, the retail & food services report for September was strong but it was also a mixed bag in terms of sector performance with very strong sectors, i.e., autos and gasoline sales, as well as very weak sectors, i.e., electronics & appliance stores’ sales, etc.
Control Group Sales Recovers in September
Perhaps the best news in this retail sales report was the recovery in control group sales, which is a sector that goes into the calculation of personal consumption expenditures. Control group sales’ was up 0.4 percent in September and was upwardly revised to 0.0 percent in August after a very strong 0.7 percent increase in July. This means that personal consumption expenditures (PCE) growth will remain relatively strong in the third quarter of the year even though it may not repeat the strength we saw in the second quarter of the year.
The implications are that either the consumer continued to bring down savings and/or increased credit use in order to support higher PCE growth in the face of a still weak performance by personal income during the third quarter of the year.
