The government said retail and food services spending rose from August by 1.1 percent, above the 0.7 percent forecast by analysts polled by Thomson Reuters.The report also showed a 4.5 percent spike in electronics and appliances from the previous month, as well as a considerable 9.3 percent increase in auto and auto parts compared to September of last year, suggesting that as America enters its key consumer spending seasons consumers are comfortable enough with the state of their finances to boost purchases of big-ticket items.
Does this mean Americans are pulling out of a years-long slump? While there have been recent improvements in areas such as foreclosures, jobless claims and employment numbers, it’s too soon to be hailing the fall of 2012 as the point when American consumers are back to boom times. For one thing, the unveiling of a certain highly anticipated gadget from Apple Inc. (Nasdaq: APPL) played an important role in the boost in September electronics sales. Plus, unemployment is still close to 8 percent, not including the underemployed.
“This shouldn’t be considered the start of a consumer revival, though,” Paul Dales, senior economist at Capital Economics, stated in a research note. “Underlying sales were boosted by a strong 1.2% [month-to- month] rise in food sales, part of which may be due to a rise in food prices triggered by the recent drought. What’s more, the 4.5% [month-to-month] surge in electronics sales is due to the release of the iPhone 5.”
Food sales, which grew 1.2 percent in September compared to the previous month is also in large part due to an increase in prices associated with this year’s drought that pummeled corn – a major ingredient in the American process-food diet. Rising gasoline prices also contributed to higher spending.
Nevertheless, the report shows a third consecutive monthly increase as Americans have been spending more on building supplies, automobiles, health care and back-to-school items.
“Robust back-to-school spending combined with a series of new, technology-led product launches certainly helped retailers in September,” said Matthew Shay, CEO of the National Retail Federation, about Monday’s Commerce Department report. “The American consumer is holding their own in this economic environment but the question remains, for how long?”
But growth in spending doesn’t necessarily mean more Americans have more money, or that the jobs market is anywhere near where it needs to be. "The gain to spending as expected comes at the expense of a drop in the savings rate, not better wages as real disposable income fell 0.3 percent, the weakest since last November. The inflation figures were benign enough, really as expected,” David Ader, senior U.S. economist at CRT Capital Group of Stamford, Conn., told Reuters.
Meanwhile, the Empire State manufacturing index for the Mid-Atlantic region of the U.S. – a key indicator of the health of U.S. exports – is estimated to be down 6.2 percent in October from September. In September the rate of decline was 10.1 percent from July.