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Retail Sales Are Down For Big-Ticket Items, But Expectations Are High For Holiday Spending

Dave Royse

U.S. retail sales were down for the first time in seven months in September, but the move was mostly driven by declines in big-ticket purchases like cars.

The Commerce Department said Wednesday that retail sales were down 0.3% in September, led by a 0.9% decline in auto sales.

It was the first overall drop in retail sales — and the biggest — since February, and followed a revised 0.6% gain in retail sales in August. About half of the major retail categories showed month-over-month declines.

"Consumers are starting to chicken out," Chris Rupkey, chief financial economist at MUFG, told The Associated Press.

Cars, Gas Skew Report

Economists said the numbers indicate consumption growth is slowing, but also said that without slumping car sales and lower gas receipts due to lower prices at the pumps, the numbers looked much better.

Taking out cars and gas, along with building materials and food services, retail sales were nearly flat against August.

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Big Holiday Sales Still Expected

Economists and the retail industry said earlier this month that the economy could get a big Christmas gift to help stave off, or at least delay, a slowdown.

Many consumers appear still willing to spend on smaller ticket items, even if they’ve started to worry about major purchases.

The National Retail Federation said in early October it expects an increase of about 4% in holiday sales over last year, beating average increases over each of the previous five years.

Total sales of between about $728 billion and $731 billion are expected.

A big part of the continued willingness to buy is a continued strong employment outlook.

“There is significant economic unease, but current economic data and the recent momentum of the economy show that we can expect a much stronger holiday season than last year,” said Jack Kleinhenz, the federation’s chief economist.

“Job growth and higher wages mean there’s more money in families’ pockets, so we see both the willingness and ability to spend this holiday season.”

While consumers are starting to register uncertainty over trade, interest rates and other macroeconomic factors, consumers’ individual financial situations remain generally strong.

Consumers Still In Good Shape

“Consumers are in good financial shape,” said NRF President Matthew Shay.

That sentiment appeared bolstered by the latest University of Michigan Survey of Consumers, which found Americans more slightly optimistic in early October.

“Overall, the data indicate that consumption spending will be strong enough to offset weakness in business investment spending so as to keep the economy expanding into 2020,” survey chief economist Richard Curtin said.

Bucking the trend in lower consumer spending in September, according to the government, were furniture stores, clothing stores and restaurants and bars, all of which saw slight gains in the month.

The trend of overall lower consumer spending has been foreshadowed by some other economies around the world, that are also starting to report signs of slowing. In Singapore, for example, retail sales were down 1.3% in August month-over-month, and down 4.1% year-over-year.

Again, it was big-ticket items leading the drop. Auto sales crashed in Singapore, dropping nearly 20%, the island nation’s government said. Excluding motor vehicle sales, sales grew more than 2%.

The SPDR S&P Retail ETF (NYSE: XRT) is higher by 5.7% in 2019.

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