Consumers Have Economists Optimistic About Third-Quarter Growth

Key Takeaways

• Retail sales rose 0.4% in September, coming in better than analysts forecast.
• The strong results could help push the U.S. Gross Domestic Product (GDP) higher than expected in the third quarter. 
• Online stores like Amazon helped boost sales, while furniture sales slowed as the housing market remained sluggish.

Shoppers kept hitting the stores in September, showing they could continue to boost the economy despite economists' calls for a slowdown.

U.S. retail sales increased by 0.4% in September, Census Bureau data showed. Consumers again surprised economists with their propensity to spend,  as the $714.4 billion in sales was a slightly bigger jump than they expected.

What caught some economists’ attention was a measure of “core” spending that excludes sales at gas stations and auto dealerships. That measure rose 0.7% from the prior month.

“Despite worries about the financial health of the consumer and potential weakening in the labor market, U.S. retailers had a solid month in September,” Wells Fargo economists Tim Quinlan and Shannon Seery Grein wrote in a commentary.

The strong results could lead to better-than-expected growth in the U.S. Gross Domestic Product (GDP) for the third quarter, economists said.

"The September retail sales report shows the U.S. consumer still has formidable spending power that they continue to deploy in somewhat more targeted ways," wrote BMO Capital Markets' Chief U.S. Economist Scott Anderson.

E-Commerce Retailers Lead Way, While Furniture Sales Drop

Leading the way were “nonstore retailers,” which mainly includes online stores like Amazon (AMZN), as well as other e-commerce platforms and traditional catalog services. Online store sales rose 7.1% over the same time last year.

Sales were also improved at restaurants and bars, clothing stores, and health and beauty stores. 

Furniture sales dropped 2.3% as home sale activity declined amid a high interest rate environment that has made home buying difficult for many.

The monthly data comes after the National Retail Foundation projected sales would continue to grow during the upcoming holiday shopping season.

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