Retail Sales Rocketing: What's the Buzz and What's in Store?

On October 17th, the U.S. Census Bureau released September retail sales data. The data shows that U.S. retail sales in September increased by 0.7% month-on-month, which is less than the revised value of 0.8% but far exceeds market expectations of 0.3%, achieving six consecutive months of growth.

Among the 13 key categories released, sales of 9 categories increased compared to a month ago, with sporting goods being the only category that remained unchanged from August.

In terms of sub-items that increased, miscellaneous store retail sales led the way, increasing by 3% on a monthly basis. Sales for non-store retailers increased by 1.1%, and auto and parts dealers' sales increased by 1% on a monthly basis.

In terms of sub-items that declined, the demand for U.S. furniture and appliances and electronics products remains sluggish. In September, sales at electronics and appliance stores decreased by 0.8% compared to the previous month. In addition, clothing sales also decreased by 0.8% on a monthly basis, marking the first decline in six months.

a. Strong retail data has been an important driving force for U.S. economic growth this year. The retail data is far stronger than expected, indicating that consumers are still spending, and strengthening expectations of strong economic growth in the third quarter. At the same time, the labor market overall remains strong, providing room for Americans to continue spending.

b. Strong economic data also results in a higher stickiness of inflation. Last week's release of the U.S. CPI in September rebounded for the third consecutive month. With the persistent stubbornness of inflation shown in September CPI data, the continued strong demand for consumption may lead to market expectations of inflation rebounding, which could prompt the Fed to raise interest rates again before the end of the year.