Economists' Outlook

Housing stats and analysis from NAR's research experts.

Elevated Inflation Starts To Hit Consumers' Pockets; However, Retail Sales Are Higher Than Pre-pandemic

Amid unyielding inflation and rising borrowing costs, consumers are starting to cut spending. According to the U.S. Census Bureau, retail sales were roughly unchanged in September from the previous month. Consumers mostly cut back on their purchases of big-ticket items such as electronics and appliances (-0.8%), furniture and home furnishing stores (-0.7%), and motor vehicles (-0.4%). Nevertheless, compared to the previous year, retail sales continued to advance as the labor market remains strong. Even though it isn't the 9.4% and 10.0% year-over-year increases seen in the last couple of months, retail sales rose by 8.2 percentage points in the last 12 months. Thus, the market is showing signs of cooling due to elevated inflation. With unyielding inflation outpacing salary gains, retail sales activity may slow down even further in the upcoming months.

However, it's also worth noting that consumers are continuing to spend more than pre-pandemic. Specifically, retail sales — excluding gas, auto, and non-store retailers advanced to $384 billion in September — show a 25% increase from pre-pandemic levels (September 2019). As a result, demand for retail spaces continues to be solid, with neighborhood centers that offer in-person services leading the way. Specifically, the U.S. net absorption of retail spaces in the third quarter of the year was 60% higher than in the same period in 2019.

September 2022 1-Month Change 1-Year Change 3-Y Change
Retail & food services, total $684.0B 0.0% 8.2% 32.1%
Retail sales (excluding gas, auto, and non-store retailers) $384.3B 0.2% 6.4% 24.9%