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With Covid-19 continuing to cloud the outlook for face-to-face services spending, goods retailers expect a September fillip.
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The pace of retail sales likely slowed in September after a much stronger-than-expected August as consumer confidence stumbled and prices continued to skyrocket, industry experts told MNI, though new Covid-19 infections through the month likely benefited the goods sector as consumers again shied away from services.
"My expectations are positive," National Retail Federation Chief Economist Jack Kleinhenz said of September sales, noting that wage and disposable income growth through the month should help drive spending in store.
Store sales should also increase, in part, because of still-high Covid infection rates across the country, he said, which have "affected the composition of consumer spending."
Previously growing demand for services softened in September as the spread of the Covid-19 Delta variant showed no signs of slowing, Kleinhenz said. That should benefit sales at department stores, clothing/apparel stores, and electronics stores, he said, as still-record high savings rates mean consumers are ready to spend.
"The fact of the matter is that Covid did put a damper on service spending," he said. "Probably some of that spending benefitted the goods sector, in particular retail."
"Online spending will probably also benefit from the recent surge of Covid-19, largely because people were not able to go back to what we were accustomed to over the summer: a little bit more freedom to get out and shop," he added.
Kleinhenz noted that there's likely to be some "noise" in September's seasonally adjusted month-over-month figures because of Amazon Prime Day in August. But despite expectations for growth through the month, there are some risks to the downside.
Consumer confidence slipped in September, with the Conference Board's measure down 5.1% from August and down 17.6% compared to February 2020. That should put some downward pressure on discretionary spending, said Gary Raines, chief economist at the Footwear Distributors and Retailers of America, a trade association representing more than 90% of the U.S. footwear industry.
NEW VEHICLE SALES SLOW
Vehicle sales also fell through the month as limited inventories held back buying in the new and used auto markets even as demand remained high, Michelle Krebs, an analyst at online vehicle retailer Autotrader, told MNI.
New vehicle sales in September dropped to a seasonally adjusted annualized rate of 12.2 million, the slowest sales pace in 16 months and down 25% from one year ago, according to data from Cox Automotive, Autotrader's parent company.
"Demand is strong, but consumers are finding that the inventory is so low that there's just not much for them to buy, and what is out there is expensive," she said.
The average transaction price for a new vehicle hit USD45,000 in September, according to Cox. "It's never done that before," Krebs said, and consumers surveyed by the company said they would delay their purchases by as much as six months.
"More seem to be balking at the higher prices than last spring," she said.
Sales of used vehicles also fell through September as inventories tightened, dropping to a SAAR of 36 million, down just slightly from August but 13% lower than a year ago.
GASOLINE SALES DIP
Demand for gasoline slipped in September, suggesting gas station sales through the month also weakened, said Patrick De Haan, head of petroleum analysis at GasBuddy. Consumption was down about 3.4% over August, he said, though that's "on par" with expectations for a typical seasonal downturn as the summer wraps up.
Headline retail sales are expected to fall 0.2% after August's stronger-than-expected 0.7% increase, according to Bloomberg. Excluding vehicle sales, retail sales should increase 0.5%, and are expected to rise 0.4% excluding vehicle and gas station sales. Control group sales are set to increase 0.5%, according to Bloomberg after August's much stronger 2.5% gain.