U.S. Retail Sales Rose 1.9% in September -- 2nd Update

By Harriet Torry

Retail sales increased in September for the fifth month in a row, as consumers prepared for further months of working and studying from home by spending strongly on vehicles, sporting goods and at home-improvement stores.

"Consumers are playing catch-up" on spending, buying things that they didn't purchase in the spring, said Calvin Schnure, senior economist at Nareit, a trade group that represents real-estate investment trusts. Friday's report "shows that the consumer recovery remains on track as we head into the holiday season."

Retail sales, a measure of purchases at stores, restaurants and online, increased a seasonally adjusted 1.9% in September from the prior month, the Commerce Department said Friday.

"These are really blowout numbers, said Craig Johnson, president of Customer Growth Partners, a consulting firm.

"September is kind of a hinge month" between the back-to-school and holiday seasons, he said, adding that this year's back-to-school season pushed further into September because many schools delayed opening for in-person classes, giving sales of school supplies and clothing a second wind.

The coronavirus pandemic has prompted retailers to encourage an earlier start to the holiday season this year, both to avoid crowds at stores and ease pressure on shipping and supply chains. Amazon.com Inc.'s Prime Day sales event this week propelled consumers to spend billions more online, kicking off an end-of-year shopping season that is expected to be dominated by e-commerce shopping.

Categories related to the booming housing sector performed well in September, according to Friday's report, with sales at home-improvement and furniture stores both increasing last month. Home buyers have been rushing to get more living space in recent months as many Americans anticipate working from home for a while.

Still, other data indicate the broader economic recovery is losing momentum. Overall consumer spending remains below pre-pandemic levels because outlays on in-person services such as dentist's visits, travel and sporting events haven't fully rebounded. Monthly job gains have slowed in recent months. New applications for unemployment benefits, a proxy for layoffs, rose last week to the highest level since late August. U.S. industrial production -- a measure of output at factories, mines and utilities -- fell a seasonally adjusted 0.6% in September, snapping four months of growth.

Retail sales returned to pre-pandemic levels in June and have pushed higher every month since then. The retail-sales report doesn't track spending on most services, such as health care and hospitality, which make up the bulk of U.S. consumer spending. Unlike other economic data reports produced by the U.S. government, retail sales aren't adjusted for inflation.

Blerina Uruci, an economist at Barclays, noted how strong consumer spending is for durable goods.

"It's a shift from services that in many ways is forced because people have to be more cautious due to the [coronavirus] pandemic," she said.

Laura Harrison and her husband, Drew, bought a home in Nashville, Tenn., in July because they wanted more space, including an office for Ms. Harrison, who worked from home before the pandemic.

They have faced "lots of expenses we weren't prepared for" related to their house purchase, such as furnishings. "We'd gotten to a place where we were really debt-free, and buying a house set us back a bit more than we thought beforehand."

Ms. Harrison has also noticed creeping inflation, with gasoline and food costs rising. Her grocery bill has increased by about $75 to $100 per shopping trip compared with before the pandemic, she said.

"It's just all those little things, those daily things that seem to have gone up even though pay hasn't gone up," said Ms. Harrison, who works as a media planner for a TV company.

Sales at motor-vehicle dealerships, which make up about 20% of total retail sales, rose by a robust 3.6% in September. That is partly related to consumers shunning public transit because of high Covid-19 infection rates and rising vehicle prices, according to economists. The Labor Department reported Tuesday that while the consumer-price index rose 0.2% in September, the index for used cars and trucks jumped 6.7%. New-vehicle prices rose 0.3% from the prior month.

But real-time data from private firms show total consumer spending, which includes outlays for in-person services, is still lower than a year ago.

Credit- and debit-card data collected by Affinity Solutions and research group Opportunity Insights showed that overall spending was down 2.3% at the end of September compared with January levels. JPMorgan Chase & Co.'s tracker of credit- and debit-card transactions showed spending was down 5.8% compared with a year ago through the week ended Oct. 10.

Write to Harriet Torry at [e-mail]

(END) Dow Jones Newswires

10-16-20 1053ET