Global Economy Briefs

Inflation and interest rates weigh on September retail sales

October 14, 2022

The latest retail sales data show a consumer struggling under the weight of high inflation and rising interest rates. Nominal retail spending was flat in September — rising zero percent month-over-month and 8.2 percent from a year earlier. However, when adjusted for inflation, sales fell -0.4 percent from the previous month.* Looking ahead, we expect consumer spending growth to fall deeper into negative territory as the economy slips into recession.

Consumer demand for goods retreated in September – falling by -0.1 percent from the previous month in nominal terms. Spending on motor vehicles and parts fell by -0.4 percent in September from August, while retail sales excluding motor vehicles and parts were flat month-over-month. Spending at gasoline stations dropped -1.4 percent for the month as crude oil prices continued to slip from their June highs. Retail sales less motor vehicles, gasoline, and building supplies (known as “Retail Control”) rose 0.4 percent from the previous month. Online sales at non-store retailers rose 0.5 percent in September. When adjusting goods spending for CPI inflation the real growth rate was about 0.2 percent from the previous month.*

Meanwhile, spending at food services and drinking places rose by 0.5 percent month-over-month, vs. 1.8 percent in August. However, after adjusting for CPI inflation, the real growth rate fell by about -0.2 percent from the previous month.*

US consumers grappled with further price increases in September, even as gas prices continued to ease somewhat (a trend that is reversing in October). These retail sales data, when adjusted for inflation, reveal a consumer that is struggling with inflation and interest rates at the cash register. Looking ahead, these forces will likely result in a sustained contraction in consumer spending as the US economy slips into recession.

* Real growth rates are The Conference Board estimates based on Census Retail Sales data and BLS CPI data