Retail Sales Beat Forecasts in September on Gas Prices

The retail sales september report came in hotter than expected, but the headline hides a weaker story underneath. U.S. retail sales rose 0.8% last month, the Commerce Department’s Census Bureau said Thursday, well above the 0.3% economists polled by Reuters had forecast. August’s gain was revised upward to 1.3%.

The catch: rising gasoline prices accounted for most of the increase. Gas prices soared 7.1% in September, according to the Energy Information Administration, and spending elsewhere was moderate at best.

The K-Shaped Squeeze

The oil price shock tied to the U.S.-Israeli war with Iran is straining consumers — particularly those on the lower end of what economists call a K-shaped economy. Inflation-adjusted wages fell again in September, even as headline spending held up.

Consumers keep spending, but higher-income households are doing the heavy lifting, partly thanks to stock market gains. The Federal Reserve’s Beige Book this week said most districts reported “little or no change in overall consumer spending” between late August and early October, with some firms noting lower-income customers growing “more cautious.”

What It Means for Growth

The moderate underlying spending could temper expectations for another quarter of robust consumer spending growth — the engine of the U.S. economy. Markets will be watching whether the gasoline-driven bump fades as quickly as it arrived.

Source: Reuters