Economists' Outlook

Housing stats and analysis from NAR's research experts.

Instant Reaction: Retail Trade Sales October 15, 2021

U.S. advance estimates of retail and food service sales for September 2021 increased from the prior month. Retail sales recorded a seasonally adjusted total of $625.4 billion in September, a 0.7% increase from August. In the middle of September, the Fed decreased its forecast for GDP growth to 5.9% from 7% with the expectation that the unemployment rate would close out the year at 4.8%. Inflation as measured by the CPI was up 5.2% year-over-year in August, charged by continued consumer demand and supply chain disruptions. Consumer confidence declined in August to its lowest level since February 2021 with concerns over current economic conditions, short-term growth, and the Delta variant. Despite those headwinds, August retail sales increased on both a month-over-month and year-over-year basis.

The increase in retail spending in August reflects the continued perseverance of consumers as they continue to propel economic recovery. Armed with the same resilience and momentum, consumers, according to today's U.S. Census Bureau retail sales data, displayed their willingness to spend amid continued Delta variant concerns, inflation, and supply chain impediments, preferring to spend on goods as opposed to services. Retailers have shown their resilience with their ability to adapt as they were able to align the labor force, goods, and processes in order to best serve consumers despite labor shortages and other pandemic-related obstacles.

The 0.7% increase in retail sales in September built upon the 0.9% gain recorded in August, where the majority of the underlying data, for the most part, was higher on a month-over-month basis, which is an encouraging sign that consumer spending may finish strong for the year.

Furthermore, month-over-month retail sales saw the largest increases in sporting goods, hobby, musical instrument, and book stores (3.6%); general merchandise stores (1.9%); miscellaneous store retailers (1.8%); gasoline stations (1.7%); and clothing and clothing accessories stores (1.0%), amongst other categories that increased. Motor vehicles and parts dealers saw sales increase by 0.5%, which recoups a portion of the 3.3% decline it realized in August. Importantly, consumer spending at food services and drinking places increased 0.2% in September, which indicates that U.S. consumers are still going out and participating in activities that were significantly impacted by the pandemic. Conversely, retail sales decreased in September for health and personal care stores (1.4%), and electronics and appliance stores (0.8%).

On a year-over-year basis, overall retail sales were up 13.9% from year-ago levels with retail sales increasing most in gasoline stations (38.1%), food services and drinking places (29.4%), and clothing and clothing accessories stores (22.3%). On the whole, increases in consumer spending looks promising in early Q4, with optimism that consumers will continue their current spending habits as the economy continues to recover. Although flush with elevated savings and a propensity to spend, rising inflation and slower supply chains continue to be of concern and could impact retail spending moving forward; however, do not discount the consumer.