U.S. Retail Spending Increases For Third Month, But Gains Are Moderate

The good news is that consumers are spending, but the bad news is that their wallets are hardly open wide. Retail spending rose last month by 0.6% after an upwardly revised 0.7% August increase. The last was slightly higher than expectations for a 0.4% increase. In part, the relative firmness of the increase reflected a 1.6% gain in motor vehicles and parts. That rise mirrored the 2.5% increase in unit light vehicle sales reported earlier this month. Excluding autos, retail sales rose 0.4% which roughly equaled Consensus expectations. A 0.9% m/m decline in gasoline prices held back the increase and minus autos & gasoline sales rose 0.5%.

All of this dissecting aside, the third quarter was not one of exuberant spending. During Q3 total retail sales rose at a 2.4% annual rate which was down from 4.6% in Q2 and the weakest since the economic recovery began. Most of that slowdown was limited to sales at building materials and garden equipment stores where sales fell at an 11.4% rate during Q3, but elsewhere sales were moderate.

Sales at electronics and appliance stores rose at a very-slightly improved 2.8% rate last quarter and 1.5% in September. Sales at general merchandise stores rose at a firmer, though still-modest, 2.3% rate last quarter. They were unchanged in September after a 0.5% August increase. Finally, apparel store sales fell at a 0.8% rate during the quarter and were down slightly in five of the last six months.

Even sales at restaurants and drinking places rose just moderately. The 3.2% gain last quarter was the weakest this year, and down by half from the Q1 rate. Working the other way were sales at non-store retailers which rose at a 13.0% rate last quarter which was nearly triple the Q2 increase. Sales rose 1.0% during September after a 1.9% August jump.

Monetary Policy Objectives and Tools in a Low-Inflation Environment is the title of this morning's speech by Fed Chairman Ben S. Bernanke and it can be found here.