Business News

September US retail gross sales develop quickest in three months

US retail sales grew at the fastest pace in three months in September, although concerns about the economic recovery remain amid uncertainty about additional stimulus measures.

Retail sales rose 1.9 percent last month, driven by high spending on vehicles, clothing and sporting goods, the trade department said on Friday. In August, sales rose more slowly by 0.6 percent. Economists expected a moderate increase to 0.7 percent.

The data shows the resilience of the American consumer, who has driven the recovery throughout the coronavirus crisis amid large amounts of fiscal stimulus to keep spending going. While government support is now waning, many US households were able to increase consumption in September.

"Consumers have made a tremendous amount of savings [and fuel for spending] from the already generous transfer payments from March to July," said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Ken Perkins, president of consulting firm Retail Metrics, said the numbers were partly explained by consumers who have diverted their spending on travel, entertainment and other parts of the service economy. "This money goes into the hardware and retail space," he said.

The numbers indicated a continued boom in home improvement as Americans spent more time indoors. Furniture spending rose 4.6 percent from the previous year, while spending on building materials and garden tools rose 19 percent.

Michael Pearce, a senior US economist at Capital Economics, noted that "consumers are replacing additional purchases of goods to offset the continued decline in spending on non-retail services."

"However, we are cautious when events in Europe are a reminder of how quickly virus cases could recur, which could dampen the recovery in the US," added Pearce. Cases have risen sharply in recent weeks in a number of states in the United States, including Wisconsin, Ohio, and North Carolina.

Neil Saunders, general manager of retail at GlobalData consulting firm, said fewer coronavirus business restrictions mean more buyers are spending money.

"There are also early signs that vacation spending is being brought forward," he added. "This is both because retailers are promoting offers and deals more heavily, and because consumers want to avoid a last-minute rush."

Sales in the parts of the sector hardest hit by the coronavirus increased from the previous month, although they remained well below normal levels. Department store and clothing store sales rose 9.7 percent and 11 percent, respectively, from the previous month, although they were still down 7.3 percent and 12.5 percent from 2019.

Grocery stores continue to benefit from a decline in spending in restaurants, bars, and other food service locations, down 14 percent year over year. Sales in food and beverage stores increased by 10.5 percent compared to the previous year.

So-called control sales, which remove more volatile items like food, gasoline and building materials, rose 1.4 percent, above expectations of a 0.2 percent increase and after a 0.3 percent decrease in August.

Overall, retail sales have caught up on the ground lost since the pandemic began, although the labor market is still suffering from millions of jobs lost.

The September surge could also be partly due to delayed back-to-school purchases as some states pushed back on reopening, Jefferies analysts said. They warned that without further fiscal support, "the strength of September may have been the last hurray for the consumer this year".

Retail sales may provide evidence of the soundness of the US consumer, but are unlikely to do much to bring Congress and the White House closer to an agreement on further economic stimulus.

Trump administration officials and Congressional Democrats have been arguing for weeks over whether to approve a new economic aid package worth up to $ 2 billion before the election.

Each deal is expected to include new checks for US households valued at up to $ 1,200 per person and a new round of emergency unemployment benefits, both of which would prop up consumer spending.

Amid the stalemate, economists have become cautious about the fourth quarter, and particularly the crucial Christmas shopping season for retailers, when household incomes fall without new fiscal stimulus.

Federal Reserve Chairman Jay Powell has advocated additional aid, warning that too little support for the American economy would create "unnecessary trouble for households and businesses" and would be far more dangerous than offering excessive aid.

Related Articles