US September retail sales data looked impressive on the surface but concealed underlying concerns — elevated fuel prices inflated the headline reading, while a number of consumer goods categories contracted during the same period, signaling that the squeeze from inflation is spreading to household disposable spending.
Data released Thursday by the US Commerce Department showed that September retail sales rose 0.8% month-on-month, above the market expectation of 0.3%, with a year-on-year increase of 6.3%. However, core retail sales excluding autos and gasoline rose only 0.2%, and the "control group" sales figure — used directly to calculate goods consumption in GDP — edged up just 0.1% month-on-month, a sharp slowdown from August. At the same time, data published the same day by the US Bureau of Labor Statistics showed that September producer price gains were the largest in more than four years, further highlighting the persistent nature of inflationary pressure.
Bank of America credit and debit card data showed that consumer fuel spending in September rose more than 20% year-on-year, while total card spending per household rose only about 0.2% month-on-month, a sharp deceleration from 1% in August. Apparel, home improvement, furniture, dining and several other categories posted negative growth during the same period, and the crowding-out effect on consumption has begun to emerge.
Gas prices drive the headline number as core consumption momentum weakens
The main contributor to September retail sales growth came from gas stations, where sales surged 6.4% month-on-month, the largest gain among 13 categories. Of the 13 consumer goods categories, eight recorded growth, with furniture, electronics and dining sales all rising, and restaurant and bar spending up 1.1% month-on-month.
Yet beneath the headline figure, the divergence in consumption is clear. Analysts at Bank of America observed in the bank's September credit card data that while fuel spending accelerated, several major consumer categories softened, specifically including: home improvement (-1.6%), department stores (-1.1%), apparel (-0.9%), furniture (-0.5%), dining (-0.4%), groceries (-0.2%) and online spending (-0.1%).
The "control group" sales figure used to estimate GDP goods spending had climbed sharply in August, but recorded only 0.1% month-on-month growth in September, indicating a marked pullback in consumption momentum at the end of the third quarter.
Persistently high gas prices intensify budget pressure through the crowding-out effect
Nationwide gasoline retail prices have remained above the politically sensitive level of $4 per gallon for three consecutive months, while diesel prices are hovering above $5 and approaching record highs, against a backdrop of persistently tight global refining capacity.
Bank of America analysis data showed that consumer fuel credit and debit card spending rose 5% month-on-month in September, notably faster than the 3.1% increase in August, while total card spending per household rose only about 0.2% month-on-month during the same period, well below August's 1%, confirming the judgment that rising fuel prices are squeezing spending space in other categories.
UBS analyst Ritu Solanki noted in a Wednesday briefing on US bank earnings that consumer spending, loan growth and corporate activity remained broadly healthy, with no signs of widespread deterioration in credit performance, though inflationary pressure persists.
Consumption resilience and pressure coexist as companies and banks diverge in their assessments
Despite data showing intensifying divergence, several financial institutions remain relatively optimistic about the consumer outlook. Wells Fargo, JPMorgan Chase and Citigroup have all signaled that consumer resilience remains broadly intact.
At the same time, some corporate executives take a more cautious view of the consumer environment. Domino's Pizza and Albertsons both acknowledged in recent earnings calls that many consumers remain in a challenging economic environment.
From a macroeconomic perspective, a healthy job market, higher-than-usual tax refunds and rising stock prices have been the main factors supporting consumer demand this year. Separate data on Thursday showed that initial jobless claims remain at historically low levels, with no obvious deterioration in the labor market.
However, persistently rising inflationary pressure, stubbornly high fuel prices and structural contraction across consumer categories are combining to squeeze household budgets from multiple directions — a trend that warrants continued market attention.
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