October 17, 2024

Retail sales rose 0.4% in September after gaining 0.1% in August and having jumped 1.2% in July.  In the past year retail sales have risen 1.9%.

Motor vehicle sales were unchanged in September after having declined 0.4% in August but jumping 4.4% in July   Car sales have been bouncing around in recent months which is not unusual.  In the past year car sales have been unchanged.

Retail sales ex autos and gas, which eliminates the two most volatile components and is a better gauge of the trend pace of sales, rose 0.7% in September after rising 0.3% in August after gaining 0.5% in July,  In the past year this so-called core spending pace has risen 3.6%, but in the last three months it has climbed at a 6.2% pace.  While everybody thinks the pace of consumer spending should slow as higher inflation and falling real income finally begins to take its toll, it is hard to see in the retail sales data..

Restaurant sales rose 1.0% in  September after climbing 0.5% in August and 0.6% in July.   In the past year restaurant sales have risen 3.7%.   But in the past 3 months restaurant sales have quickened to an 8.6% pace.  Diners seem unphased and are happily going out to eat.

Sales at nonstore retailers rose 1.4% in September after having jumped 1.6% in August after having declined 0.3% in July.   In the past year nonstore sales have risen 7.0%.  In the past three months the pace of sales has been 6.9%.  Consumers continue to shop online.

The problem is that inflation was rising more quickly than sales and, as a result, real retail sales had been declining in real terms.  Our income had been rising and we kept spending, but the amount of goods and services we were able to purchase with our fatter paycheck was somewhat less than it was a year ago.  Real retail sales rose 0.3% in September after having declined 0.1% in August after having jumped 1.1% in July.  Real sales have declined 0.5% in the past year.  But they have quickened to a  4.7% pace in the past three months as the negative impact from inflation boosts the real increase in sales.

GDP is expected to slow in the months ahead because consumers are running up their credit card bills in an effort to maintain their style of living.  Unfortunately, credit cards are a very expensive way to add debt.  At some point consumer spending should slow.  but it is hard to see in the data available thus far.  We expect 2.5% GDP growth in both the third and fourth quarters.

Stephen Slifer

NumberNomics

Charleston, SC