Retail sales up 4.5% in September from a year ago; Trump tariffs creating concern

Consumers are still spending, albeit less in September than in August, but more than a year ago, according to data released Wednesday (Oct. 16) by the U.S. Census Bureau and the National Retail Federation (NRF).

Retail sales in September, excluding automotive dealers, gas stations and restaurants, dipped 0.1% compared to August. That number is seasonally adjusted. The raw, unadjusted sales rose 4.5% from a year ago, said the NRF.

“The pullback in September compared with August is possibly a reaction to increased fears over U.S.-China tensions,” NRF Chief Economist Jack Kleinhenz said. “While uncertainty around trade policy and other issues has dampened consumer sentiment recently, consumers still have a lot going for them as evidenced by longer-term trends and factors like the tight labor market. September is a tricky month to measure because of seasonal factors like the end of summer and back-to-school spending, and this year’s early Labor Day may have moved up some spending into the last days of August.”

The trade group said as of September the three-month moving average rose 4.9% compared to the same period last year. That three-month average was also higher than the 4.1% increase reported in August. Kleinhenz said September’s results build on gains of 0.5% month-over-month and 4.7% year-over-year in August. The Census Bureau reported September retail sales are down 0.3% – seasonally adjusted from August – but unadjusted numbers rose 4.1% from the year-ago period.

The Census Bureau reported online sales rose 15.6% in September compared to a year ago, despite being down fractionally from the previous month. Online sales led all other categories for year-over-year growth. Health and personal care stores such as drugstore chains and specialty beauty retailers reported a 4.2% increase in sales compared to the prior year. That said, the category slipped 0.6% from the August report.

Walmart grocery and other food and beverage store sales rose 2.6% year-over-year in September while sliding 0.1% from the previous month. The rise in food sales is partially attributed to modest inflation. The U.S. Labor Department said the average price of food in the United States increased by 1.8% in the 12 months ended September after rising 1.7% in August.

While the housing market is slowing, building material and garden supply stores reported a sales increase of 2.5% in September from a year ago. Sales were down 1% from August. Home Depot, one of the largest retailers in this category, posted better-than-expected earnings results for second-quarter fiscal 2019, continuing its beat streak of more than five years. However, the company slashed its sales and comparable sales view for fiscal 2019 on lumber price deflation and expectations of potential negative impacts of Trump’s tariffs.

Furniture and home furnishings stores reported a 1.1% increase in year-over-year sales in September. This was also one category that did improve from August rising 0.6% on a seasonally adjusted basis. Sporting good store sales were flat in September compared to a year ago, falling 0.1% from the prior month.

General merchandise stores reported a 0.2% dip in year-over-year sales, down 0.3% from the August report. General merchandise is one category that is quickly migrating online. Apparel is another category with a growing online presence which is likely why clothing and accessory stores reported a 0.7% dip in sales from a year ago. The back-to-school push did help to increase September sales by 1.3% from August.

Electronic sales are also a category with growing online presence. Best Buy is the leading electronics and appliance store in brick and mortar who reported mixed second-quarter results. Same-store sales grew by 1.6%, short of the 2.2% analyst had predicted. Best Buy reported revenue of $9.54 billion compared with the $9.56 billion estimated. As more electronics sales move online, Best Buy is focusing on appliance sales and expanded services out of the brick and mortar locations.

Electronics and appliance stores sales were down 1.7% year-over-year in September, but unchanged month-over-month, according to the Census Bureau data.

“Consumer spending has been the strong force in the economy, goods inflation is up only slightly and most of the spending by consumers goes toward services. We see savings remain high, income growth is positive and real disposable income is up about 2.5% which is plenty strong enough to see consumers keep spending as long as confidence and sentiment don’t buckle,” said Sarah House, senior economist with Wells Fargo Securities.