Retail sales in the US rose at just half the expected pace in September, and a measure of wholesale prices was benign where it needed to be.
Those were two of the main takeaways from Tuesday’s belated releases from the Commerce Department and the BLS.
Overall nominal spending on goods, restaurant food and bar tabs rose a mere 0.2% in September from the prior month, an underwhelming result, even as it extended the streak of monthly gains to four.
Control group sales, which economists use to refine GDP estimates, fell for the first time since “Liberation Day.”
“Spending during September could have come under pressure as consumers lacked the sense of job security that has been in place throughout most of the cycle,” BMO’s Ian Lyngen remarked.
Although headline hiring rebounded in September, the US economy lost jobs on net during two of the prior three months, and perceptions of the labor market are weakening.
Eight of 13 categories in the retail sales report showed a gain for September. Spending at food and drinking places, the only services sector category, rose 0.7%. Non-store sales fell by the same amount.
Meanwhile, the BLS’s PPI tally found the headline printing an as-expected 0.3% for September versus the prior month. The core measure barely rose versus expectations for a 0.2% gain.
The figure shows the services gauge, which was flat MoM, and also trade services, which showed a second straight decline (and a third in four). Remember: The trade indexes measure wholesaler and retailer margins.
Although the final demands goods index rose by the most since February of 2024, almost two thirds of that was attributable to a near 12% jump on the gas gauge. The food index advanced 1.1% from August.
All in all, these two releases pointed to a moderation in the spending impulse, somewhat tepid underlying demand and generally tame wholesale price pressure at the close of Q3.
I don’t see this data being decisive for the Fed narrative even if, when considered with another lackluster read on ADP weekly hiring, you could argue the doves’ case is as strong as it’s been since before the October FOMC meeting.
