Retail sales are strong in September

September retail sales data issued by the United States Department of Commerce and the National Retail Federation (NRF) showed annual gains.

Commerce reported that September retail sales at $483.9 billion were up 1.6% over August and 4.4% annually. And total retail sales from July through September rose 3.9% compared to the same period in 2016.

NRF said that September retail sales were 0.5% ahead of August on a seasonally-adjusted basis and up 3.2% annually on an unadjusted basis. The organization also stated that some key retail sectors showed decent gains, including:

• building materials and supplies stores up 2.1% over August seasonally adjusted and up 7.7% unadjusted year-over-year;
• online and other non-store sales were up 0.5% seasonally adjusted from August and up 5.8% unadjusted year-over-year; and
• general merchandise stores were up 0.3% seasonally adjusted over August and up 4.7% unadjusted year-over-year

“Retail appears to have navigated through some rough weather – literally,” NRF Chief Economist Jack Kleinhenz said. “Hurricane impacts were very clear, with a strong boost for building materials going a long way to offset downturns elsewhere. Results were mixed among several business lines but the bottom line was a good increase over August and strong growth from a year ago. While the hurricanes played a major role in the data, they did not fundamentally affect the upward path of the economy.”

Earlier this month, the NRF issued a positive holiday season retail sales forecast.

These sales, as defined by the NRF, are sales in the months of November and December and exclude autos, gas, and restaurant sales. For 2017, NRF is calling for holiday retail sales to be up 3.6%-4% annually, coming in at an estimated total between $678.75 billion to $682 billion, which is ahead of last year's $655.8 billion, even at the lower end of the 2017 estimate.

What's more, NRF said that 2017 would top or exceed 2016's holiday retail sales tally of 3.6%, as well as the five-year average of 3.5%.

NRF said the model it uses to forecast retail sales is based on an economic model using various economic indicators, including consumer credit, disposable personal income, and previous monthly retail sales data, with the over all number including the non-store category (direct-to-consumer, kiosks, and retail sales).

A calendar-related factor helping to augment 2017 retail sales, according to the NRF, is that Christmas this year comes 32 days after Thanksgiving, providing one more day than in 2016 and falls on a Monday rather than a Sunday, which offers consumers another day on the weekend to get shopping done.

NRF President and CEO Matthew Shay said he is encouraged by this forecast, as this range is positive over all and in line, or, better than 2016's.

“One thing is the strength of the economy as a whole,” he said. “The recent economic growth number of 3% [GDP] is very good…and not as robust as we would like to see but still very solid,” he noted. “It shows that the economy is expanding at a steady but modest pace. We think the economy is in a very good place. The current state of retail is also positive and strong across the board. The industry is making big investments, with bricks and mortar companies spending more to improve what they do online, as well as legacy online players that are getting better at connecting with consumers in non-traditional channels, including bricks and mortar locations. Our forecast reflects the steady momentum of the economy and industry expectations.”

Shay said that the strength of the consumer is another factor weighing into the positive forecast, with consumers largely responsible for the “heavy lifting” of the economy and keeping growth going forward, even though the final reading for the Thomson Reuters Consumer Sentiment Index for September at 95.1 showed a slight decline after a seven-month high in August.

Even with the decline, he said this data shows a willingness to spend on behalf of consumers, coupled with how they are accessing credit and taking on additional debt.

Addressing e-commerce’s impact on retail sales, Shay said that it online retail helps to make retailers better merchants, serving as a means to an end, rather than an end itself.

“Those that successfully figure out how to bridge the gap and reach consumers where they are using a balance of both physical and digital are going to be successful, and that based on the historical basis of those companies they are always going to have a foot in one camp or the other, with more more firmly rooted than the other,” he said, “but nevertheless it is a dynamic place, [albeit one] with volatility and transformation, but we feel very positive about what is happening and energized by the conversations taking place, and we are expecting to see these things playing a role and coming to the fore during a really exciting period over the next few months.”

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