Retail sales in September showed more of the same modest, mildly encouraging growth for the third month in a row, according to government figures.
The Commerce Department's retail and food services sales tally for September rose to $367.7 billion, up 7.3% from September 2009 and up 0.6% from August 2010, the third month-over-month increase this year.
The momentum is important, easing fears of a double dip into recession. Most analysts see moderate retail growth going forward into the holiday season, which forecasters predict will see a modest increase of between 2% and 3% above last year's sales.
Autos Come in Strong
Excluding auto sales, totals were up 5.4% from the year-ago month and retail sales only were up 7.7%. The Commerce Department's tally is the most complete picture of retail; it includes gas, food and auto sales, as well as the results of Walmart (WMT), the world's largest retailer, which doesn't publicly report monthly sales.
Auto and gas sales remain the strongest segments in retail. Car dealers were up 19% in September, aided by the start of the new model year, while gas stations were up 8.2%.
Nearly all segments of retail saw growth year-over-year, even though September is the first month this year that was not helped by an easy comparison. Last year's sales numbers were held up against the months when the recession began in 2008.
Only department stores saw September sales drop below the same time time last year, down 0.8%. All segments were also up over the sales in August. Clothing and department stores were the only segments dropping below August's sales, down 0.2% and 0.1% month over month, respectively.
Employment Worries Persist
The increases were cold comfort for some industry observers. As long as unemployment remains high, any gain in sales will be a matter of how retailers manage to goad worried shoppers into parting with their money, the experts say.
While a third month of increases is good momentum, consumer spending remains challenged by persistently high unemployment, said Sandy Kennedy, president of the Retail Industry Leaders Association, a merchants' group. "Without a meaningful improvement in the job market, retail sales gains will be sluggish and hard won," he said, in a statement.
But a number of segments that had been beaten down recently showed unexpected strength in September: Hardware and garden centers (up 7.3% year-over-year), electronics (up 5.6%) and home and furniture stores (up 3.1%). And the three also showed momentum going into fall, with month-over-month growth of 1.5% among electronics stores, which had been dragged down by lower electronics prices and the lack of new products recently. Hardware and home stores had more modest monthly increases of 0.6% and 0.5%, respectively.
Sale Prices Are Key
Those increases are a function of consumers responding to attractive pricing, said Brian Sozzi, analyst at Wall Street Strategies. He noted electronics prices have stabilized since a bout of deflation earlier this year, but remain low, and home furnishings prices remain competitive.
"Consumers may be saying 'let me get a piece or two before these deals are no longer being offered'," Sozzi said in an email. He also noted the strength in home sales earlier in the year could be driving some interest in new housewares.
The increase in discretionary, non-essential sales is encouraging and a change in what merchants have seen during this economic cycle, said Matthew Shay, president and CEO of the National Retail Federation.
"There's no question that the industry is in a much better state than this time last year," he said in a statement. But he noted that consumers are still relying on sales and promotions.
"September retail sales show that the economy is continuing to grow, even though it remains at a subpar pace," said NRF Chief Economist Jack Kleinhenz. "Given the stubbornly high unemployment and other challenges that families are facing today, these increases are still quite impressive."