US retail sales saw the largest increase in growth in more than two years during September, as recovery efforts got under-way in the wake of Hurricanes Harvey and Irma.
New figures from the US Census Bureau show retail sales increased 1.6% in September from the previous month and were 4.4% above the same month last year.
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Last month’s increase in retail sales was the largest since March 2015, according to Reuters.
Sales at clothing stores were up 0.4% from August, and 1.1% higher than September last year. Sales at general merchandise stores rose 0.3% on the month before, and were 4% higher year-on-year; while department store retailers booked a decline of 0.4% on August, and a drop of 0.5% year-on-year.
Meanwhile, sales at sporting goods and hobby stores slipped by 0.2% on the month, and by 5.5% on the year before.
However, separate figures from the National Retail Federation (NRF) suggest clothing and accessories sales in September were up 0.4% seasonally adjusted from August and up 1.5% unadjusted year-over-year.
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By GlobalData“Retail appears to have navigated through some rough weather – literally,” says NRF chief economist Jack Kleinhenz. “Hurricane impacts were very clear, with a strong boost for building materials going a long way to offset downturns elsewhere. Results were mixed among several business lines but the bottom line was a good increase over August and strong growth from a year ago. While the hurricanes played a major role in the data, they did not fundamentally affect the upward path of the economy.”
Last month, Kleinhenz said that while it was too early to assess the impact Hurricanes Harvey and Irma have had on the economy and retail sales, there was “no doubt” that they will impact consumer spending – particularly in certain sectors – as Florida and Texas work to rebuild.
The potential economic impact on lost retail sales from Irma alone was estimated at US$2.75bn.
Irma impact on US retailers rises to US$2.75bn
The September numbers come as retail continues a long-term pattern of increased sales. Total retail sales have grown year-over-year every month since November 2009, and retail sales as calculated by NRF – excluding automobiles, gasoline stations and restaurants— have increased year-over-year in all but one month since the beginning of 2010.
But weaker than expected spending in the first quarter, coupled with decelerating inflation, has contributed to a lower forecast for US retail sales in 2017, which are now expected to grow between 3.2% and 3.8% rather than the 3.7% to 4.2% seen earlier this year.
Weaker spending affects US retail sales forecast
Neil Saunders, managing director of GlobalData Retail, notes overall, September was a good month for retail sales with a “substantial rise” in spending supported by both higher gas prices and an increase in the number of people buying vehicles.
“Although the devastating hurricanes boosted the numbers, mostly thanks to stimulating demand to replace damaged cars and by initially pushing up gas prices, the figures nonetheless demonstrate the robustness of the American consumer,” he adds. “Indeed, the fear for September was that as gas prices rose, spending on other things would fall back. In the end, this did not materialise, and consumers used modest gains in wages – supported by the robust labour market – to carry on buying even as they incurred additional expense.”
The firm’s weekly sentiment tracker showed a little more caution about future household finances creeping in during September but also revealed very few significant changes in purchasing habits across the month. “In our view, the American consumer has quite a bit of firepower, even if some of this is being funded by credit,” Saunders said.
Using the September numbers as a guide to holiday performance is challenging, he adds, not least because of the various exceptional factors which have impacted the month. “However, stripping these out suggests the consumer is in a good and stable position, which bodes well for the critical upcoming trading period. That said, it is clear that while the consumer is still willing and able to spend, they are doing so conservatively and are carefully weighing up the necessity and the value of purchases.
“In this type of environment, retailers have to work hard to stimulate demand. In our opinion, this means that while there are gains to be had over the holidays, those gains will be hard won and will be insufficient to benefit all retailers.”
