US retail sales rose 0.8% in September, above 0.3% forecast; prior month at 1.3%

• Prior figure: 1.3%

Details

• Month-over-month retail sales: +0.8% versus an expected +0.3%. The prior reading was revised to +1.2% from +1.1%.

• Excluding autos, monthly retail sales were +0.9%, against a +0.5% forecast. The previous figure was revised to +1.4% from +1.3%.

• With gasoline and autos stripped out, retail sales rose +0.2% on the month. The prior reading was revised to +1.2% from +1.1%.

• The retail control group gained +0.1% month over month, versus a +0.3% estimate. Its prior reading moved up to +1.4% from +1.2%.

September retail sales came in above forecasts, with a 0.8% increase against a projected 0.3%. Ex-auto sales also topped expectations by a clear margin, and revisions to earlier data made the prior month look stronger.

The finer details, though, dull the top-line figure somewhat. Outside of gasoline and autos, sales advanced a softer 0.2%. The control group — used in calculations of goods consumption within GDP — edged up only 0.1%, short of the 0.3% forecast. That comes after an August gain revised up to 1.4% from 1.2%.

Quick analysis: The top-line number is solid, yet the report underneath is more mixed. Household spending remains intact, even though the weaker control group hints at less momentum in the areas that matter most for the consumption calculation. Because retail sales count dollars spent, higher prices can boost the total without consumers purchasing more goods. The strength in the headline could lend support to the dollar and Treasury yields and reduce the Fed's need to loosen policy, but the control-group shortfall softens that signal.

More details

The most striking element is the outsized role gasoline played in the headline advance.

• Gasoline stations were behind 71% of September's dollar gain. Overall sales climbed $5.70 billion, of which gas station sales supplied $4.07 billion. At gas stations, sales surged 6.4% from the prior month and were 28.1% higher than a year earlier.

• Strip out gasoline and the data look tamer. Total sales were up 0.8%, but ex-gasoline sales edged up only 0.2%. With autos also removed, the increase was 0.3%. Spending continues to grow, yet the headline exaggerates how much momentum exists elsewhere.

• Restaurants also stood out. Food services and drinking places rose 1.1%, after August's roughly 1.4% advance. Eating and drinking places added another $967 million to September's gain. Combined, gas stations and restaurants made up about 88% of the total dollar increase.

• Elsewhere, discretionary categories delivered a mixed picture. Furniture sales climbed 1.3% and electronics gained 0.6%. Clothing was roughly flat, general merchandise slipped, sporting goods, hobby and book stores dropped 0.5%, and miscellaneous retailers fell 3.0%. Consumer outlays are happening, but the gains are patchy.

• Autos contributed only mildly. Dealers of motor vehicles and parts saw sales advance 0.2%. That is why the ex-auto figure of 0.9% came in a touch above the headline.

• Nonstore retailers kept expanding, though September's pace eased. Their sales were up 0.3%, after roughly 2.0% in August. Year over year, they were still 8.1% higher.

A crucial point: seasonal adjustment is not the same as inflation adjustment. The data reflect dollars spent. The jump at gas stations alone cannot show whether drivers purchased more fuel or simply paid more per gallon.

My takeaway: Spending by households continues, but this is not the widespread burst of spending the headline implies. Gasoline carried much of the load, restaurants lent support, and the rest of the categories were uneven.

What this report measures: The Census Bureau's retail sales report follows monthly spending at retailers and food services businesses. The figures are seasonally adjusted but not inflation-adjusted, and they can be revised. The control group leaves out autos, gasoline, building materials and food services, which aids economists in gauging goods consumption within gross domestic product (GDP).