Retail Sales Sep 2024: Taking the Helm on PCE?

We look at a third consecutive growth month for retail sales as the consumer decisively shows that there is still room to run.

Oct 17, 2024

Enjoy it while it lasts before the tariffs…

Headline September retail sales had a strong month at +0.4% vs. August and the core retail group was even higher at +0.7%. That tallies to three consecutive positive months in 3Q24 as worries in 2Q24 around consumer health has lost some weight.
The continued decline in gasoline prices has weighed on the headline prints vs. the core print in the past few months. However, that reallocation of spending towards other discretionary items is further evidence that consumers still are not feeling too much pressure just yet.
September saw CPI a little warm, payrolls soaring, and now a strong retail sales report to add into the data mix. The combination should give the Fed ample headroom to move but slowly with the UST reaction seeing moves higher across the curve.
We already saw the 10Y UST pop by +8 bps to just under 4.1% as we go to print with 2Y UST just under 4.0%, up over 5 bps.

Retail Sales for September are at a healthy +0.4%, and the recent trend underscores a consumer continuing to tick along. The beginning of the year saw concerns around consumer health as the downswings in retail sales coincided with deteriorating consumer credit metrics.

With more 3Q bank and consumer finance earnings and 10-Q filings still to come, we are missing some key data points for some. Deterioration is expected for subsets of the market, but it is not clear if consumer credit health will continue to moderate or deteriorate further into 2025 beyond these more normalized levels. Although consumer health uncertainty remains, it is not on top the worry list for now.

The core retail sales print came in above headline at +0.7% with the trade off between lower gas prices and restaurant and bar spending leading to a net negative effect on headline. This is also a 3^rd straight month of increases for core retail that with today’s print will inch 3Q24 GDP estimates up.

The recent data comes together to signal a strong economy with the rate cycle kicking off just about a month ago. The debate around the pace of rate cuts will continue with the end of the month seeing a blitz of 3Q GDP estimates, PCE, and Payrolls just ahead of the next meeting.

The table above shows the underlying line item movements across the September release and shows the key ex Autos and Core retail lines. We have already discussed the positive signal from the decrease in gas station spending shifting to discretionary lines like restaurants and bars and the strength of that trend is shown above.

Within core retail sales, the majority of categories showed positive growth, except for the smaller Furniture and Electronics & Appliances groups, which struggled with YoY declines of -5.3% and -6.6%, respectively. The positive side saw several recoveries from a down month Food & Beverage, General Merchandise, and Clothing recovering. The broad-based growth in discretionary spending is encouraging and suggests consumer health remains stable this month.

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