MNI REALITY CHECK: US Sep Retail Sales Seen Moderating Again

U.S. retail sales likely rose modestly in September, figures due Friday should show, but a full recovery to pre-pandemic remains imperiled by increasing Covid-19 infection rates and disagreement among Congressional leaders over the price tag of a fiscal stimulus package, industry experts told MNI.

The 0.8% month-over-month gain in the Bloomberg forecast would overtake August's smaller-than-expected 0.6% increase, but would still reflect a significant slowdown from outsized gains earlier in the summer.

"There are several factors at play now that are providing a bit of tailwind to momentum from previous months," said Jack Kleinhenz, chief economist at the National Retail Federation, noting that rising Covid-19 case counts across the nation could offset recently renewed strength in personal savings and consumer confidence.

"The overall outlook remains in pretty good shape," he added. "But there's still a lot of uncertainty out there" that could drive down sales.

Still, Kleinhenz said pent-up demand that has bolstered sales through the summer should again prop up headline September sales by supporting purchases of "big ticket" items like home furnishings and cars.

Vehicle sales strengthened in September, outpacing August's numbers by upwards of one million, said Charlie Chesbrough, senior economist at Cox Automotive, the Atlanta-based parent company of online vehicle retailers Kelley Blue Book and Autotrader.

New vehicle sales reached a seasonally adjusted annual rate of 16.3 million in September, he said, citing data from Cox, just under the 17 million pace set last year. New vehicle sales in August reached an annualized 15.2 million.

"We've definitely had a nice v-shaped recovery in light vehicle sales," he said, but noted the downside risks ahead.

Inventories for new and used vehicles are "thinning" as health issues slow production and push up demand for personal transportation, he said, which will likely put downward pressure on sales through the next few years. Gridlock in Washington over further federal relief for households is also hurting sales of used vehicles in particular, he noted, as they are typically purchased by hourly workers disproportionately affected by pandemic-related layoffs.

Excluding motor vehicle sales, retail sales should be up 0.4% in September, according to Bloomberg.

GAS SALES

Gas station sales likely moderated further in September, with fuel demand down roughly 3.8% from August, said Patrick De Haan, head of petroleum analysis at Gasbuddy, which tracks real-time gasoline prices from stations across the U.S.

That's fairly "on par" with September of last year, he said, though overall demand is still far from "back to normal."

"Since July, we've returned to 85%-90% of normal, and that last 10% is probably going to take quite some time," he said. "The easiest recovery is behind us now," and increasing infection rates remain a headwind in many parts of the country.

"You're seeing demand take a longer time to recover in the more urban areas where there is a higher concentration of coronavirus cases," he said. "Some of the more rural areas are closer to normal."

Excluding motor vehicle and gas station sales, September retail sales should increase 0.5% from 0.7% in August.

APPARELS HIGHER

Friday's numbers will likely show sales from apparel retailers improving modestly from August, said Gary Raines, chief economist at the Footwear Distributors and Retailers of America, a Washington-based trade association representing more than 90% of the U.S. footwear industry. But that strength could be short-lived.

"[September] was an improvement from August, but I use the word improvement a little loosely," he said. "You see this modest improvement in the first weeks of September, but things softened the last week of September and the first week of October."

Raines said early holiday shopping could boost sales this month, but the government will need to inject more cash into the economy to fuel sustained purchases of discretionary items like clothing or accessories.