Retail Sales Remained Soft in September

“Gasoline price declines likely reduced nominal retail sales in September, but we project decent gains in other spending, wrote UBS economists in a client preview”.

Most economists expect the Fed will raise its benchmark overnight interest rate in December, but financial markets are only pricing in an increase early next year. Employment, which has seen gains all year, is slowing, plus, economists say, even those gains haven’t translated to the wage gains that would support a bigger, more sustained boost in consumer spending. The slowdown, caused largely by global pressures, has raised questions about whether retail sales and consumer demand can sustain economic growth in the coming months. August sales were down 3.1 per cent from a year earlier, and inventories were up 2.4 per cent from August 2014. Americans have been going out to eat over the past year (http://www.marketwatch.com/story/us-consumers-splurged-with-gas-savings-after-all-study-finds-2015-10-09), perhaps a sign that they are still fairly confident about the economy. Retail inventories excluding autos, which go into the calculation of GDP, rose 0.4 percent in August after increasing 0.3 percent in July.

Sales rose a healthy 1.7% at auto dealerships, which helped drive the modest increase in overall purchases.

The weak inflation environment is one of the obstacles confronting policymakers who are contemplating raising rates for the first time in almost a decade. Excluding gasoline, retail sales increased 0.4 percent last month. The US central bank has kept its short-term interest rate near zero since late 2008.

Economic growth has softened in recent months, mainly because of weak exports, a persistent decline in energy sector investment and a so-called inventory correction, which have hurt manufacturing activity. Furniture stores reported a 0.6% rise. Spending at restaurants advanced 0.7 percent, and shopping at clothiers improved 0.9 percent.

Adding to the lacklustre tone of the report, the department revised August’s reading to flat from a 0.2% rise originally reported.

But sales at gasoline station fell 3.2% because of tumbling prices. Sales at online stores fell 0.2 percent.