Click here to view the Custom Marketplace Update [PDF].
The U.S. retail sales data for September 2024 continues to show resiliency in the U.S. consumer. The month of September came in with a 0.4% month-over-month increase overall, bringing total retail sales to $714.4 billion. This growth in spending has also been consistent recently as there has been positive growth over the last 3 months and, year over year, sales have increased 1.7%. This continues to underscore strong demand for goods and services across various sectors. Nonstore sales have been particularly strong growing 7.1% over the past 12 months. In addition, Health and personal care and food services have also had high demand with sales increasing by 4.6% and 3.7% respectively.
In addition, we can see how the consumer continues to bounce back and find ways to spend as sales continue to remain positive. Going back to the beginning of 2022, the spending for the month of September remains slightly above the average over this time.
Interestingly, as employment has been softening over the past year, we would expect spending to weaken as well. This strength in consumer spending seems to be at odds with the more subdued trends occurring in the labor market. However, zooming out and looking at the broader averages of spending over the past few years, the trends may be more in alignment than they initially appear. The year-over-year spending growth has definitely cooled off over the past 3 years.
Also, if we examine the average retail sales rates year by year, we do see that on the whole, rates have been softening and the average sales so far in 2024 is at the lowest point since before the pandemic.
So, while the retail sales figures remain somewhat optimistic, growth has been largely driven by pent-up demand and spending on essential categories, such as food and health services. In contrast, discretionary sectors, such as electronics and furniture, experienced a notable contraction in sales, signaling that consumers are becoming more selective about where they spend their money. The apparent disconnect between retail sales growth and slower employment gains does make economic projections more complicated. On one hand, consumer spending is one of the key drivers of the U.S. economy, accounting for approximately two-thirds of GDP. If there is sustained momentum in retail, it would suggest that consumers are confident, and their spending habits will continue to bolster the economy in the short term. However, the labor market’s gradual weakening may eventually feed into consumer behavior, leading to a reduction in discretionary spending as households begin to feel the pinch of job insecurity or stagnant wages. We think that the broader trend is leaning more towards the latter scenario, with the labor market continuing to normalize we expect spending will feel this impact and continue to soften.