Retail Sales Rise 0.7% in September, Stronger Than Expected

The Census Bureau’s Advance Retail Sales Report for September revealed a 0.7% increase in headline sales compared to August. This marks the sixth consecutive month consumer spending has increased. The latest figure was much stronger than the anticipated 0.3% monthly growth.

For an inflation-adjusted perspective on retail sales, take a look at our Real Retail Sales commentary.


Here is the introduction from today’s report:

Advance estimates of U.S. retail and food services sales for September 2023, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $704.9 billion, up 0.7 percent (±0.5 percent) from the previous month, and up 3.8 percent (±0.7 percent) above September 2022. Total sales for the July 2023 through September 2023 period were up 3.1 percent (±0.4 percent) from the same period a year ago. The July 2023 to August 2023 percent change was revised from up 0.6 percent (±0.5 percent) to up 0.8 percent (±0.1 percent).

Retail trade sales were up 0.7 percent (±0.5 percent) from August 2023, and up 3.0 percent (±0.5 percent) above last year. Nonstore retailers were up 8.4 percent (±1.6 percent) from last year, while food services and drinking places were up 9.2 percent (±2.3 percent) from September 2022.

The chart below is a log-scale snapshot of retail sales since the early 1990s. The three exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator. The red line is a linear regression through the complete data series. The green line is a regression from the start of the series through the end of 2007. It’s extrapolated to the present, thus excluding the Financial Crisis. The blue line is a regression from the start of the series through the end of 2019. It’s extrapolated to the present, thus excluding the COVID-19 pandemic. Monthly retail sales have been above the red and blue line since March 2021. This signals increased consumer spending that was most likely pent up as a result of the pandemic.


The year-over-year percent change provides another perspective on the historical trend. Compared to this time last year, current retail sales are up 3.8%. Here is the headline series with a callout to the most recent 12 months.


Core Retail Sales

Core sales (ex Autos) also exceeded expectations by increasing 0.6% in September, higher than the forecasted 0.2% increase. Compared to September 20022, these sales are up 3.2%. Here is the year-over-year chart of core retail sales with a callout to the most recent 12 months.


“Control” Purchases

The next two charts illustrate retail sales “control” purchases, which is an even more “core” view of these sales. This series excludes motor vehicles & parts, gasoline, building materials as well as food services & drinking places. The popular financial press typically ignores this series, but it’s a more consistent and reliable reading of the economy. Retail sales control purchases increased 0.6% in September, stronger than the expected 0.1% growth.

Similar to the sales snapshot chart earlier, the chart below is a log-scale snapshot of control purchases since the early 1990s and includes two of the exponential regressions previously mentioned.


Here is the same series year-over-year. Compared to one year ago, current control purchases are up 3.7%.

Retail Sales Control YoY

For a better sense of the reduced volatility of the “control” series, here is a YoY overlay with the headline retail sales. Note that the two series follow each other closely, but headline sales have more extreme highs and lows than the control series.

Retail Sales Headline and Control YoY

Bottom Line: Retail sales rose more than expected in September as consumers spending picked up for a sixth straight month.

These sales will impact interest in the SPDR S&P Retail ETF (XRT), VanEck Retail ETF (RTH)Amplify Online Retail ETF (IBUY), and ProShares Online Retail ETF (ONLN).