US Retail Sales Increase More Than Expected in September

U.S. retail sales rose by a better-than-expected 0.8% in September, demonstrating continued consumer resilience even as inflation persists and gasoline prices climb.

This follows a revised 1.3% increase in August, according to data released Thursday by the Commerce Department. Economists surveyed by FactSet had anticipated a 0.3% rise for September.

Excluding sales at gas stations, retail sales saw a more modest increase of 0.2% in September. The government figures do not account for inflation, which accelerated last month as the costs of gasoline and many other goods and services increased.

Business at gas stations surged by 6.4%, contributing significantly to the overall retail sales figure as consumers paid more per gallon. Other sectors also saw growth: furniture and home furnishings stores reported a 1.3% increase, electronics and home appliance stores saw a 0.6% rise, and department stores posted a 1.6% gain. Online retailers experienced a 0.3% increase in business.

The report's data provides a snapshot of consumer spending on goods and does not include services such as travel or hotel stays. However, the restaurant sector, the only services category tracked in the retail sales report, registered an increase of 1.1%.

Many Americans are continuing to spend despite significant increases in gasoline prices, which have been exacerbated by renewed conflict in the Middle East. The average price for regular gasoline rose to $4.33 per gallon on Thursday, up from less than $3 per gallon before recent geopolitical events.

This spending resilience occurs against a backdrop of a job market that has shown signs of cooling, with U.S. employers adding a lower-than-expected 29,000 jobs in the latest reporting period and the unemployment rate ticking upward. Nevertheless, the job market has remained solid amidst various economic shocks.

Inflation continues to be a challenge for consumers. The Consumer Price Index rose 3.7% in September compared to a year ago, an increase from the 3.4% rise in August, according to the Labor Department. On a monthly basis, costs jumped 0.6% from August to September, the largest monthly gain in five months. The prices of toys, new and used cars, sporting goods, and shoes all saw notable increases last month.

"September’s growth shows consumers are still spending, but I wouldn’t read it as broad strength," said Natalie Kotlyar, national leader of BDO's retail and consumer products practice. "With inflation running above 3% and gas prices high, part of this gain is simply higher prices, and many shoppers are leaning on savings and promotions to stretch their budgets."