U.S. shop­pers pick up spend­ing in Sept.

Re­tail sales gain 0.6%, but signs of cau­tion emerge

Baltimore Sun - - MARY­LAND - By Josh Boak

WASH­ING­TON — U.S. shop­pers stepped up their spend­ing in Septem­ber, with sharply higher sales at auto deal­ers, restau­rants and gas sta­tions. But the gov­ern­ment’s re­tail sales re­port re­leased Fri­day also con­tained some ev­i­dence that spend­ing might be slow­ing.

For much of this year, con­sumers have spent at a solid pace as in­come gains have ac­cel­er­ated and the job mar­ket has im­proved. Last month’s over­all re­tail sales gain was a de­cent sea­son­ally ad­justed 0.6 per­cent. Much of it, though, was due to higher oil prices, which in­creased how much peo­ple spent at gas sta­tions but were not nec­es­sar­ily a sign of stronger con­sumer spend­ing. In the first nine months of 2016, re­tail sales have in­creased 2.9 per­cent com­pared with ’15.

Septem­ber’s over­all in­crease in re­tail sales marked a re­bound from Au­gust’s slug­gish 0.2 per­cent gain, the Com­merce Depart­ment said. Dur­ing the first nine months of the year, re­tail sales have in­creased 2.9 per­cent com­pared with 2015. In­creased sales have helped pro­pel eco­nomic growth and have off­set a di­min­ished U.S. man­u­fac­tur­ing base and broader weak­nesses in the global econ­omy.

“This morn­ing’s re­port pro­vides con­fir­ma­tion that the Amer­i­can con­sumer re­mains a key driver of eco­nomic growth,” said Mi- chael Dolega, a se­nior econ­o­mist at TD Bank.

Higher oil prices drove a 2.4 per­cent in­crease in sales at gas sta­tions last month, though pur­chases re­main down on a year-over-year ba­sis be­cause of pre­vi­ous price de­clines. Spend­ing at restau­rants im­proved 0.8 per­cent in Septem­ber. Auto deal­ers, build­ing ma­te­ri­als stores and fur­nish­ers notched monthly gains of 1 per­cent or more.

Depart­ment stores suf­fered a 0.7 per­cent sales de­cline in Septem­ber, part of a long-term slow­down for the an­chor ten­ants at many shop­ping malls that in­creas­ingly must com­pete with on­line out­lets. But even on­line sales were soft. They rose a mere 0.3 per­cent in Septem­ber, com­pared with re­cent monthly gains av­er­ag­ing nearly 1 per­cent.

Some an­a­lysts took a more down­beat view of re­tail sales, not­ing that cor­po­rate prof­its are be­ing squeezed. And there are signs of fragility: Ex­clud­ing mo­tor ve­hi­cles and gaso­line, sales rose just 0.3 per­cent in Septem­ber af­ter be­ing flat in Au­gust and de­clin­ing 0.2 per­cent in July.

“We con­tinue to be­lieve that pres­sure on cor­po­rate profit mar­gins will spur ag­gres­sive cost- cut­ting mea­sures, which will in­creas­ingly im­pinge on the pace of job growth through the course of next year,” said Joshua Shapiro, chief U.S. econ­o­mist at con­sul­tant MFR. “We there­fore feel that the con­sumer is un­likely to be able to sus­tain a sub­stan­tial ‘ en­gine of growth’ role as we move through 2017.”

Con­sumer spend­ing, which ac­counts for about 70 per­cent of eco­nomic ac­tiv­ity, in­creased at a 4.3 per­cent an­nual rate in the April-June quar­ter. That in­crease fu­eled much of the over­all es­ti­mated an­nu­al­ized eco­nomic growth rate of just 1.4 per­cent dur­ing the April-June quar­ter.


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