Retail sales rose 0.7% in September, comfortably beating estimates

KEY POINTS

• Retail sales rose 0.7% for the month, well above the Dow Jones estimate of 0.3%. Excluding cars, sales increased by 0.6%, also well above forecasts of just 0.2%.

• Sales growth was overall month-over-month, with the largest increase coming from multi-store retailers, which increased 3%. Online sales rose 1.1%.

• The retail trade report holds significant importance for the Federal Reserve, as its officials carefully consider the path of future monetary policies.

• To everyone’s delight, consumers showed remarkable strength in September, as retail sales not only exceeded expectations but also withstood the challenges of higher interest rates and concerns about the economy’s slowdown.

• Retail sales saw a robust increase of 0.7% for the month, comfortably exceeding the Dow Jones estimate of 0.3%, as revealed in a preliminary report from the Commerce Department on Tuesday. Sales at gas stations contributed to the increasing popularity of this number, which increased by 0.9% due to the price increase at gas stations.

• Excluding automobiles, sales rose 0.6%, well above forecasts of just 0.2%.The so-called control group, which excludes car dealerships, gas stations, office supply stores, trailer parks, and tobacco shops and is used to calculate the ministry’s GDP, also rose by 0.6%.

• The figures are not adjusted for inflation and therefore indicate that consumers do not simply follow price increases. The consumer price index released last week showed headline inflation rose 0.4% in September.

• Year-over-year revenue increased 3.8%, compared to a CPI increase of 3.7%.

• Treasury yields rose after the report’s release, while stock futures losses widened.

• David Russell, TradeStation’s global head of market strategy, noted that consumers seem to have an insatiable appetite for spending. All the third-quarter retail sales surpassed expectations, setting the stage for robust GDP figures anticipated later this month.” There is no justification for the Federal Reserve to implement policy measures that would drive the yield to a remarkable 10-10%.

• Sales growth was overall month-over-month, with the largest increase coming from multi-store retailers, which increased 3%. Online sales rose 1.1%, while retail and auto parts stores increased 1%, while food service and grocery stores increased 0.9%, representing annual growth of 9.2% and leading all categories.

• Only a few categories saw a decline; Electronics and appliance stores and clothing stores posted monthly declines of 0.8%.

• The retail trade report is seen as a key factor for the Federal Reserve as officials weigh the future of monetary policy. While markets generally expect the Fed to stop raising interest rates this cycle, the equation is complicated by surprisingly high levels of consumer spending.

• In other economic news on Tuesday, the Fed reported that industrial production rose 0%.in September it was 3%, above estimates of 0.1%. Capacity utilization, or the level of potential production, rose to 79.7%, 0.1 percentage points above estimates. The Commerce Department also reported that overall inventories rose 0.4% in August, a tenth of a point above estimates.

• Fed Chairman Jerome Powell speaks in New York on Thursday; This is an event that markets will be watching closely for clues as to which direction they think interest rates will move. The next meeting of the Federal Open Market Committee, which sets interest rates, will be October 31-November 31.1.

• The market view is that the FOMC will not raise interest rates now, but may decide to do so at future meetings if economic data remains strong. According to CME Group’s futures price indicator, the implied probability of a hike in December rose to about 43 after the release from 34% on Monday.

• Consumers face challenges at the end of the year.

• Employment growth is expected to slow, although it exceeded expectations. Credit card balances are rising, with Bank of America reporting a monthly balance increase of 0.2% in September. The resumption of student loan payments is also expected to impact spending.

• Still, strong economic growth is expected in the third quarter, with the Atlanta Fed’s GDP tracker indicating potential annual growth of 5.1%.

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