Retail Sales Up 0.7% in September as Inflation Continues to Rise

Consumer Spending

Labor Day travel and continued consumer resilience contributed to a 0.7% increase in consumer spending last month, the U.S. Commerce Department said on Friday (Oct. 15), marking the second month in a row that retail sales have increased.

Preliminary data show that gas stations saw a 1.8% rise in sales in September from August, with clothing store sales up 1.1% and sales of sporting goods, musical instruments, hobby items and books up 3.7%.

Miscellaneous store retailers — which include pet stores, florists and secondhand stores — and general merchandise stores each also saw a nearly 2% bump.

This higher spending, however, is in part attributable to rising costs — the Labor Department said earlier this week that consumer prices were up 0.4% between August and September and 5.4% year over year. Retail sales are not adjusted for inflation.

Economists had expected a decline in auto sales to drag down overall retail sales in September, but motor vehicle dealers actually saw a 0.6% month-over-month increase after falling by 3.7% in August. Where sales did decline last month was at electronics stores, which saw a 0.9% decrease, and health and personal care stores, which saw a 1.4% decline.

The Commerce Department also slightly revised its August results to 0.9%, up from the preliminary report of a 0.7% rise.

See also: Back-to-School, eCommerce Help Boost August Retail Sales by 0.7%

On a year-over-year basis, retail sales were up nearly 14% in September, with gas stations, clothing stores and restaurants seeing the biggest jump versus last year.

The Restless Consumer 

According to PYMNTS’ Pandenomics research, which surveyed a census-balanced panel of U.S. consumers, people are now more worried about how COVID-19 will impact the economy than how it will impact their health. Twenty-eight percent more consumers cite the economy, and not their health, as their chief concern, with 62% “very” or “extremely” worried about how the pandemic will impact the economy.

Read more: New Data: Only One-Quarter of Post-Pandemic Consumers Eager to Get out — and Spend — More

Because of waning health concerns, 50% of Americans plan to resume dining out, traveling, entertainment activities and shopping in stores, as is reflected by the two consecutive months of retail sales growth reported by the Commerce Department.

And that growth — pending any unforeseen issues or COVID-19 spikes — is poised to continue, with 27% of consumers planning to increase their shopping at physical retail stores and a similar share planning to eat out at restaurants more over the next three months.

Still, that leaves nearly three-quarters of consumers who are in a holding pattern, even as new COVID-19 cases have fallen over the past two weeks in a majority of states.

Supply Chain Headwinds 

Additionally, retailers continue to face myriad issues that are slowing the production and import of products, including factory shutdowns in Asia, a backlog of ships at ports around the world, and labor shortages at transit companies and warehouses.

Leaders at the top U.S. banks predicted that supply chain issues will mostly be resolved within a few months, though merchants and brands could continue to see longer-term ripple effects. IKEA, for example, said earlier this week that it expects to face stock shortages for another year because of the ongoing supply chain bottlenecks. And Nike, which lost production time and is facing transit times double those seen prior to the pandemic, expects to be hurting for the next several quarters.

Related news: Bank Execs Wary but Hopeful Supply Chain Snarls Will End by 2022

Jack Kleinhenz, chief economist for the National Retail Federation, said the September retail sales report “is very promising for a strong finish for the year,” but noted that inflation and slow supply chains remain a concern going forward.

“Spending might have been higher if not for shortages of items consumers are eager to purchase,” he said in a statement.