By: Mark Simenstad, CFA, Chief Investment Strategist, Thrivent Asset Management October 17, 2017
Retail sales were up 1.6% in September – the largest gain in 2 ½ years – following a 0.1% decrease in August (revised), according to the latest Retail Sales Report issued October 13 by the U.S. Department of Commerce.
We would attribute much of that increase in sales to recovery efforts from Hurricanes Harvey and Irma in Texas and Florida. We expect spending patterns to begin to return to normal in the months ahead as the impact of the hurricanes diminishes.
Auto and auto parts sales experienced their biggest increase since March 2015 – a 3.6% gain for the month – as consumers replaced or repaired autos lost in the storm.
Gas station gross sales moved up even more, but we believe the 5.8% increase resulted from the approximately 10% spike in gasoline prices after several refineries were shut down in the Houston area. We would expect gasoline sales to start to return to previous levels now that supplies and pump prices are returning to normal.
One other area that has been bolstered by the recovery is the building materials and garden equipment sector, which had already been one of the strongest areas of the retail economy this year. In September, the sector was up 2.1% for the month and 10.7% year-over-year.
Here are some of the key results of the retail report:
- Food services and drinking establishments have been weak lately, but had a strong gain in September, up 0.8% for the month and 2.7% year over year.
- Non-store retailers, which refers primarily to online sales, have been the steadiest area of growth for several years. The new report showed growth of 0.5% from the previous month and 9.2% year-over-year – which is slightly lower than most previous months in 2017.
- Department stores, which continue to be challenged by the online retailers, were were down 0.4% for the month and down 0.5% from a year ago.
Generally, the upward trend in retail sales and personal consumption expenditures has been slow but steady in recent months and years, with personal consumption expenditures rising for 31 consecutive months beginning February 2015.1 Total retail sales in September were up 4.4% from a year ago, although extra hurricane-related expenditures in September probably added 1% to 1.5% to that total.
In the next few months, we might see a slight drop in retail sales back toward more normal levels as the hurricane recovery spending begins to recede.
All information and representations herein are as of October 13, 2017, unless otherwise noted.
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management associates. Actual investment decisions made by Thrivent Asset Management will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.
1 Federal Reserve Bank of St. Louis Personal Consumer Expenditures as of Aug. 31, 2017
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