U.S. Retail Sales Lagged Inflation Again in September

By Geoffrey Smith

Investing.com -- U.S. retail sales were flat in nominal terms in September, below expectations and again highlighting the pressure on consumer spending power from high inflation.

However, core retail sales, which strip out some of the more volatile elements of the consumer shopping basket, edged up 0.1%, slightly better than forecast, in an overall mixed report.

The numbers come a day after consumer price inflation data showing that prices rose 0.4% in the same month. That suggests that sales volumes - as opposed to values - fell again in September.

Spending fell particularly sharply on durable goods, with furniture, electronics, and motor vehicles all showing declines of more than 0.7% on the month. By contrast, spending on food sales rose 0.4% and on food services rose 0.5%. Online channels also fared better than Main Street, with a 0.5% rise.

The numbers also reflect a trend of growing disinflation for durable goods, as consumer spending has swung back toward services and travel this year thanks to COVID-19 restrictions being lifted. Prices for imports, particularly, have been helped by the restoration of something more like normality on ocean shipping routes as well as by the strength of the dollar, which has hit a series of 20-year highs in recent weeks.

The index of U.S. import prices fell by more than 1% for the third straight month, with prices falling both for fuel and non-fuel goods. The decline in non-fuel prices accelerated to 0.4% from 0.2% in August.

"After the discouraging signs offered by this week's PPI and CPI reports, today's import prices have shown some slowing of inflation pressures in the economy," said Oxford Economics' Matthew Martin in a note to clients, although he warned that this would not be enough to stop the Federal Reserve from continuing to tighten policy aggressively.

"Given the acceleration of core CPI prices, the Fed will remain resolved to increase rates by at least 125bps before year end," Martin said. "Slowing global trade flows, higher rates, and waning domestic demand will continue to support lower import prices, barring any further unexpected shocks to supply chains."