September Retail Sales - Inflation/Rates Weighing on Consumers

U.S. retail sales slowed in September with inflation adjusted spending unchanged from a year ago and down month over month.  Weaker retail spending is an indication that rampant inflation is catching up with consumers.  The Fed is expected to implement a fourth 0.75% rate increase next month as part of an ongoing effort to soften demand across the economy – today’s report suggests that may be starting to happen.

• Real (inflation adjusted) retail sales unchanged year-over-year.  In September, retail sales grew 8.2% compared to a year ago netting 0% real growth after adjusting for inflation.  Higher spending on gasoline compared to a year ago (+21% YoY) accounted for a large portion of the nominal increase though modest real gains were also evident in online retail (+12), food services and drinking places (+11%), and building materials (+10%).  On the flip side, spending on electronics and appliances declined nearly 9%, while brick & mortar retail and furniture sales both trailed inflation levels.  Today’s report suggests consumers are becoming more guarded about discretionary purchases amid elevated inflation levels.
• Real (inflation adjusted ) retail sales fell 0.4% month-over-month.  In September, retail sales levels were unchanged compared to August (consensus +0.2%) netting -0.4% deterioration after adjusting for inflation.  Sales at brick & mortar retailers declined 2.5% while spending at gasoline stations fell 1.4%.  All told, seven of thirteen categories registered nominal declines compared to August.