US retail sales rose 0.8% in September as gasoline-station spending surged

Americans stepped up spending at retailers and restaurants in September, but the latest government snapshot is more lopsided than the headline number suggests. The Census Bureau's advance estimate, released Thursday morning, put seasonally adjusted retail and food-services sales at $745.0 billion for the month, up 0.8% from August and up 6.3% from a year earlier. Much of the monthly gain came from one place: gas stations.

August's previously reported 1.1% increase was revised up to 1.3%, and the bureau noted that its monthly estimates were also adjusted on Sept. 28 to reflect historical corrections and its 2023-2024 Annual Integrated Economic Survey. For the third quarter as a whole, sales were up 5.5% from the same period a year earlier, a pace that has held up despite months of uneven category-by-category results.

Where the gains came from

Gasoline-station sales jumped 6.4% for the month and 28.1% from a year earlier, by far the largest mover in Thursday's report and a reflection of higher pump prices rather than more fuel sold. Restaurants and bars rose 1.1%, electronics and appliance stores 0.6%, and furniture and home-furnishings stores 1.3%. Nonstore retailers, largely e-commerce, rose a more modest 0.3% for the month but were up 8.2% from a year earlier. On the weaker side, general merchandise stores slipped 0.1%, building-material and garden-supply stores fell 0.6%, and miscellaneous store retailers, a volatile category, dropped 3.0% after a strong August.

Excluding autos and gasoline, the categories the Federal Reserve watches most closely for an underlying read on consumer demand, sales rose just 0.2% for the month and 5.0% from a year ago — a softer signal than the 0.8% headline figure implies, and evidence that pump prices did most of the lifting in September.

A private measure tells a similar story

A separate, card-data-based gauge lines up with the trend, if not the magnitude. The CNBC/NRF Retail Monitor, published by the National Retail Federation on Oct. 8, showed September core sales excluding autos and gas of $560.8 billion, up 0.28% from August and 4.05% from a year earlier — the 12th consecutive month of growth by that measure. "Households remain budget conscious, concentrating on everyday essentials," NRF President and CEO Matthew Shay said in that release, adding that "retailers continued to prioritize affordability, leaning on promotions and value pricing."

"We have a consumer that's willing to spend, and up until this point, we have had a consumer who's been able to spend... Now looking forward that looks a little bit more challenged because if gas prices remain high, then you know you have to start questioning where the consumer is going to fund that spending growth from."

That assessment, from Mark Mathews, the National Retail Federation's chief economist, came in wire coverage of the August report last month, but it reads as a direct preview of September's gasoline-driven number, and of the bind higher pump prices could put on spending in the months ahead.

What the Fed will be watching

Retail sales are one of the Federal Reserve's lead indicators of consumer resilience heading into its late-October and December meetings, and officials will be parsing whether September's gasoline-driven boost persists into the holiday shopping season or fades as pump prices move. The Census Bureau's retail sales release shows the department-store subset of general merchandise actually rose 1.6% for the month even as the broader category slipped, one sign that spending patterns are uneven beneath the top-line figures. Autos and parts dealers, another closely watched category, edged up just 0.2% for the month despite a 2.5% year-over-year gain. The full September report, which will add inventories and more category detail, will be followed by the October advance estimate; both are due Nov. 17, a compressed calendar that will hand the Fed one more read on the consumer before its next rate decision.

For retailers themselves, the report lands in the thick of planning for the holiday season, when fourth-quarter results will show whether September's gain was the start of a durable rebound or another one-month pop driven mostly by what households paid at the pump. Department-store chains and big-box retailers that compete directly with e-commerce will be watching nonstore sales growth of 8.2% year-over-year with particular attention, since it continues to outpace general merchandise and clothing categories by a wide margin, a gap that has defined retail performance for several years running.

A year of uneven months

September's report follows a choppier run of data than the smooth 6.3% annual gain suggests. July's initial reading showed a pullback in spending before revisions turned it positive, and August's unexpectedly strong 1.3% monthly gain beat the roughly 0.7% consensus forecast economists had penciled in at the time. Navy Federal Credit Union chief economist Heather Long described that August bounce by saying "American consumers are still opening their wallets and buying" after "a big bounce back after a weak July." Oxford Economics chief U.S. economist Michael Pearce, writing about the same July dip, called it "seasonal noise" and predicted "a deeper bifurcation of the consumer returning in the coming months" — a split between resilient higher-income spending and more constrained lower-income households that several of September's category results, from strong restaurant spending to weak general-merchandise sales, appear to echo.

None of the figures in Thursday's release are adjusted for inflation, a reminder that part of every month's year-over-year comparison reflects higher prices rather than more goods and services actually changing hands. With consumer-price growth still running above the Fed's target and gasoline now adding directly to the headline retail number, economists will be watching the next two reports, due together on Nov. 17, to see whether September's pattern holds or whether the softer "core" reading becomes the more accurate guide to how households are actually faring heading into the holidays.