Retail and restaurant sales in the United States experienced a modest increase during September, signalling a tempering of consumer expenditure following a summer of robust spending.
A Closer Look at the September Figures
The US Commerce Department reported on Tuesday that sales rose by 0.2% in September compared to the previous month. This key economic report was delayed for over a month due to the recent federal government shutdown. A significant backlog of data concerning inflation, employment, and growth is not expected to be cleared until late December.
Despite facing high prices for groceries, rent, and imported goods, the figures suggest American consumers continue to possess both the willingness and capacity to spend, a vital component for economic vitality. Economists now project that this steady spending could propel the economy to a solid annual growth rate of 3% or more for the July-September quarter. This marks a substantial improvement from the modest 1.6% expansion recorded in the first half of the year.
Contrasting Economic Signals and Consumer Trends
However, the economic landscape presents a mixed picture. Recent labour market data, also delayed and released last week, showed that hiring has weakened. The unemployment rate ticked up to 4.4% in September, its highest level in nearly four years, rising from 4.3% the previous month. A sustained deterioration in the jobs market could potentially drag down future consumer spending and broader economic performance.
Analysis from Bank of America and major retailers like Walmart reveals that the spending gains are being largely driven by higher-income consumers. In contrast, lower-income shoppers are increasingly seeking bargains and focusing their expenditure on essential items.
Implications for the Crucial Holiday Season
This retail sales report arrives just as the crucial winter holiday season is set to begin, a period during which retailers can earn up to a fifth of their annual revenue. The National Retail Federation, along with other industry forecasters, is anticipating more modest sales gains compared to last year's holiday period. Nevertheless, the NRF projects that holiday sales will surpass $1 trillion for the first time in history.
