Retail sales edge up in September

0.1% gain matches August rise; bar, eatery spending drops

— Retail sales edged up a slight 0.1 percent in September, a disappointing performance in which rebounding auto sales were offset by weakness in spending at restaurants, bars, department stores and other areas.

But a so-called core grouping of retail sales that excludes volatile categories showed a much stronger 0.5 percent gain in September, a big improvement after no gain in August.

The Commerce Department said Monday that the scant overall gain last month followed an equally meager 0.1 percent increase in August.

It was the weakest twomonth performance since the start of the year and was well below economists’ projections of a solid 0.6 percent rise in sales.

Diane Swonk, chief economist at Grant Thornton, said the rise in the “control group” of retail sales, which excludes volatile areas such as autos and gasoline sales, is important because that figure feeds directly into the data for economic growth, as measured by the gross domestic product.

“Consumers continued to spend at a fairly rapid pace despite some pockets of weakness in September,” Swonk said.

Consumer spending makes up about 70 percent of economic activity in the United States.

Some of the slowdown in sales compared with earlier in the year could be attributed to the destruction from Hurricane Florence in the Carolinas, or it could point to a tightening of wallets in

the wake of rising interest rates, analysts say.

“The softer tone in the retail spending report mirrors the hurricane-dampening effect,” Chris Rupkey, chief financial economist of MUFG Union Bank, wrote of the report. “We will see if consumers return to the bars and restaurants in the next few months as the storms clear or whether there is something darker behind the drop.”

Bar and restaurant spending fell 1.8 percent from the previous month, the biggest drop in that category in nearly two years. Bar and restaurant spending accounts for nearly 12 percent of consumer purchases.

The Commerce Department said that while there’s no way to isolate the storm’s effect on consumer spending because it doesn’t measure geographically, it “did receive indications from the companies that the hurricanes had both positive and negative effects on their sales data while others indicated they were not impacted at all.” According to Moody’s Analytics, the estimated economic impact from Florence — including property damage, lost output and flooding destruction — was between $38 billion and $50 billion, The Wall Street Journal reported. Bright spots in the report were online sales, mail order sales, furniture sales and sales at electronic stores, which were linked to the introduction of new iPhone models. Other signs of consistent spending came from rises in lowerpriced categories: bookstores, music stores, furniture stores and hobby shops.

The economy expanded at a sizzling 4.2 percent rate in the second quarter.

Analysts have been forecasting that growth will come in at a still-solid rate above 3 percent in the just completed third quarter.

The modest September gain was led by a 0.8 percent rise in auto sales. Analysts had been expecting the increase believing that sales would get a boost last month from purchases of replacement cars damaged by Hurricane Florence.

But excluding autos, retail sales fell 0.1 percent after sales excluding autos rose 0.2 percent in August.

Gasoline sales fell 0.8 percent in September after a 1.1 percent jump in August. That swing was influenced by prices that have retreated a bit after a big jump in August. The average price for a gallon of regular gasoline is $2.83, up from $2.47 a year ago, according to a nationwide survey by AAA.

Sales at general merchandise stores, which include bigbox stores such as Walmart and Target, rose 0.3 percent while sales at department stores fell 0.8 percent.

As the Federal Reserve tries to gauge the impact of increasing interest rates, steady consumer spending is one of the most powerful indicators of U.S. economic strength. Last week, when U.S. stock markets tumbled, with the Dow Jones industrial average plummeting nearly 1,400 points in two days, many analysts attributed the sell-off to fears about rising rates.

Although September retail sales were up 4.7 percent compared with last year, a decrease in spending might bode poorly for retailers as the holidays approach, analysts warned.

AP file photo A customer shops recently at a Target store in Pembroke Pines, Fla. U.S. retail sales rose just 0.1 percent in October as a rebound in car sales was canceled out by a drop in sales at bars, restaurants and department stores.