Higher Food and Energy Costs Boosting Retail Sales Figures

Retail sales picked up in September, rising +.6% MoM (consensus +.2%) versus +.3% MoM in August, as consumers remain active. Consumer spending accounts for around 70% of U.S. economic activity.

Increased purchases of autos, electronics and groceries supported the gain. The auto sales (+1.2% MoM) though appear to contrast with industry figures showing purchases slowed in September. Excluding autos, retail sales rose +.4% MoM. Sales of electronics and appliances rose +.9% MoM on continued good demand for flat panel TVs. Rising commodity prices are probably causing food spending to increase by +.8% MoM, and gasoline station sales to rise by +2% MoM in September. As would be expected in the housing slump, furniture sales dropped by -.6% MoM and building materials declined by -.1% MoM. Clothing sales fell -.4% MoM.

Excluding autos, gasoline and building materials, which are gathered from other data sources for GDP, retail GDP consumer spending grew +.3% MoM, a pick-up from the prior month.

Most major retailers are indicating that retail sales are slowing. Wal-Mart said same-store sales only grew +1.4% MoM in September. The continued housing recession, and tighter lending standards, are causing many economists to reduce holiday sales forecasts. Early signs of belt-tightening by consumers may be observed in the flat sales for restaurants over the past two months, as discretionary spending growth subsides.

This data raises third quarter consumption and GDP estimates over 3%.