RTH - Consumers Still On A Buying Binge At Retailers Online Restaurants And Auto Dealers

2023-10-18 04:35:00 ET

Summary

• Consumers went on another buying binge at retailers, fired up by the biggest income increases in decades.
• Total retail sales jumped 0.7% in September, after the upwardly revised 0.8% jump in August and the 0.6% jump in July. Compared to a year ago, retail sales rose 3.8%, seasonally adjusted.
• Retail sales outran inflation in goods by a wide margin.

Consumers still on a buying binge at retailers, fired up by big income increases that this year outran goods inflation by a wide margin.

Total retail sales , including at bars and restaurants, jumped 0.7% in September, after the upwardly revised 0.8% jump in August and the 0.6% jump in July. Over the past three months annualized, retail sales jumped by 8.7%, a sharp acceleration from late last year and earlier this year.

Compared to a year ago, retail sales rose 3.8%, seasonally adjusted. Consumers went on another buying binge at retailers, fired up by the biggest income increases in decades.

The chart above shows the three-month moving average to tamp down on the monthly squiggles that can obscure the trends.

Retail sales outran inflation in goods by a wide margin. Retailers sell goods, and inflation has shifted from goods (from retailers) to services that retailers don’t sell, and the prices of many goods that retailers sell have dropped. The CPI for durable goods has dropped 2.2% year-over-year. The CPI for nondurable goods rose 3.2% year-over-year. Combined, total goods inflation rose by 1.5% year-over-year, less than half the year-over-year increase of retail sales of 3.8% (my discussion of CPI inflation, including lots of charts, is here ).

Disposable income outran inflation in goods by a wide margin. That’s where the money for the additional spending came from. Disposable income jumped by 7.3% year-over-year, outrunning goods inflation of 1.5% by a wide margin.

Retail sales are not a measure of “consumer spending.” Consumer spending is far broader than retail sales. Consumer spending includes spending on goods at retailers but is dominated by spending on services that retailers don’t sell, and we track this overall spending by consumers separately and adjusted for inflation .

Retail sales by major segment of retailers

Among the big retailer segments, the standouts were ecommerce retailers (which include the ecommerce sales of brick-and-mortar retailers, such as Walmart’s ( WMT ) ecommerce sales), auto dealers, and bars & restaurants. Clearly, consumers are operating on the time-honored principle of YOLO.

All dollar amounts are seasonally adjusted. All charts show the three-month moving average to reduce the monthly squiggles that can obscure the trends. The charts are in order of magnitude of the segment, from biggest to smallest:

New and Used Vehicle and Parts Dealers (22% of total retail sales):

• Sales: $135 billion
• From prior month: +1.0%
• From prior month, 3mma: +0.4%
• Year-over-year, 3mma: +6.0%

Ecommerce and other “nonstore retailers” (16% of total retail sales), ecommerce retailers, ecommerce operations of brick-and-mortar retailers, and stalls and markets:

• Sales: $118 billion
• From prior month: +1.1%
• From prior month, 3mma: +1.0%
• Year-over-year, 3mma: +8.4%

Bars & restaurants (officially, “Food services and drinking places,” 13% of total retail). Consumers are spending a lot more eating and drinking out than at food & beverage stores:

• Sales: $92 billion
• From prior month: +0.9%
• From prior month, 3mma: +0.8%
• Year-over-year: +9.7%

Food and Beverage Stores (12% of total retail). Sales were roughly flat earlier this year as food prices, after spiking, flattened. Recently, food prices have been ticking up again:

• Sales: $83 billion
• From prior month: +0.4%
• From prior month, 3mma: +0.4%
• Year-over-year, 3mma: +1.9%

General merchandise stores , without department stores (9% of total retail):

• Sales: $63 billion
• From prior month: +0.5%
• From prior month, 3mma: +0.6%
• Year-over-year, 3mma: +3.5%

Gas stations got a boost from price increases (8% of total retail sales). Sales at gas stations move in near-lockstep with the price of gasoline. But gasoline prices, despite the recent price increases, are still a lot lower than they’d been in the first half last year:

• Sales: $57 billion
• From prior month: +0.9%
• From prior month, 3mma: +2.6%
• Year-over-year, 3mma: -11.3%

This chart shows the CPI for gasoline (green, right axis) and sales in billions of dollars at gas stations, including other merchandise that gas stations sell (red, left axis):

Building materials, garden supply and equipment stores (6% of total retail). Pandemic bubble, bye-bye:

• Sales: $42 billion
• From prior month: -0.2%
• From prior month, 3mma: +0.2%
• Year-over-year, 3mma: -4.0%

Clothing and accessory stores (3.7% of retail):

• Sales: $26 billion
• From prior month: -0.8%
• From prior month, 3mma: +0.4%
• Year-over-year, 3mma: +1.6%

Miscellaneous store retailers (2.2% of total retail): Specialty stores, from art supply stores to cannabis stores.

• Sales: $15.2 billion
• Month-over-month: +3.0%
• Month-over-month 3mma: -0.7%
• Year-over-year, 3mma: -1.0%

Furniture and home furnishing stores (1.6% of total retail). A big portion of furniture and furnishing sales have wandered off to the internet, with huge online retailers, such as Wayfair ( W ), dominating the scene. This is what’s left over at brick-and-mortar retailers that specialize in furniture and furnishings:

• Sales: $11.0 billion
• From prior month: 0%
• From prior month, 3mma: -0.8%
• Year-over-year, 3mma: -6.3%

Department stores (1.6% of total retail sales, down from around 10% in the 1990s). Ecommerce sales by department store chains are not included here, but are included in ecommerce retail sales above.

• Sales: $11.1 billion
• From prior month: 0%
• From prior month, 3mma: +0.5%
• Year-over-year, 3mma: -3.6%
• From peak in 2001: -40% despite 22 years of inflation.

For further details see: