Nominal retail sales accelerated to 3.8% y/y in September, as reported by the U.S. Census Bureau. In terms of the read-through to GDP for 3Q23, the recent re-acceleration of headline retail sales has been a positive development. However, underneath the headline number, the drivers of that growth have come from categories that are more related to essential items, such as health care and food, and non-store retailers. Outside of that, the autos category accelerated 6.2% y/y on a nominal basis. However, looking at the related PCE series from the Bureau of Economic Analysis (not yet released for September), we have seen a large gap in nominal versus real sales over the last two years. This dynamic is in line with what we have been highlighting in terms of headline sales data capturing higher prices, not higher unit growth. When adjusting retail sales for inflation, we have seen much weaker growth rates with the latest release moving into positive territory for the first time since January at 0.06%. Moving through year-end, we will be monitoring the category mix closely while considering unit growth, as we believe these measures may provide better insight into the direction of real economic activity.
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Senior Economic Analyst
Boyd Watterson Asset Management, LLC