Retail Sales Show Tepid Growth in September: SpendingPulse

Retail sales continued to grow in September at a pace that was roughly equal to that in August, providing some reassurance that consumers are continuing to spend, albeit in a cautious manner, according to a report released Wednesday.


The modest growth measured by MasterCard Advisors' SpendingPulse, which estimates sales across all payment forms, was even more welcome when one considers that the comparisons with last year's results set the bar higher in September than in August.

"It is a positive sign that we maintained the growth rate against a difficult comparison," said Mike Berry, Director of Industry Research for SpendingPulse.

However, the growth was uneven across the various sectors, with shoppers continuing to purchase largely the items they most needed, and only buying non-discretionary items very selectively.

A good portion of the growth came from late back-to-school purchases, a trend that should bode well for U.S. retail chains such as Gap , Limited , Macy's and Target , which are scheduled to report their monthly sales on Thursday.

But sales of luxury items were weak despite a September stock market rally. This was surprising as sales in this segment tend to track trends in the financial markets.

The research showed strong sales in categories such as clothing for children and teens as well as for some electronics items.

For the second consecutive month, sales of apparel posted a gain, rising 3.8 percent from a year ago, and outpacing the 2.6 percent gain in August.

"There really has been a tendancy for consumers to point their wallet more towards their family rather than themselves."" -MasterCard Advisors SpendingPulse, Mike Berry

This was the year’s second largest year-over-year gain in the sector, which has now posted increases in six out of the nine months in the year-to-date period.

As it did in August, the segments that catered largely to young children and teenagers logged the strongest gains. Sales in the children's segment rose 2.3 percent, while the family segment was up 7.9 percent.

However, illustrating a still-reserved consumer, spending on men's and women's apparel continued to be weak, and footwear sales treaded water.

According to Berry, high unemployment is reducing the demand for men's and women's clothing.

"There really has been a tendency for consumers to point their wallet more towards their family rather than themselves," he said.

Footwear sales rose 0.7 percent, slightly more modest than August’s 0.9 percent increase.

Meanwhile, sales of women’s apparel fell 0.2 percent, which was a smaller decline than the August drop, and men’s apparel sales fell 3.4 percent year-over-year.

The late back-to-school shopping is a trend that has occurred for several years now, as more fashion-conscious teens wait until they are back in class and can see what their friends are wearing before they finish their shopping.

Cash-constrained consumers are also delaying purchases until they are needed. No doubt the cooler weather helped to shift shoppers from thinking of shorts and flip flops to thinking of sweaters and jackets.

In the consumer electronics and appliances segment, trends were mixed. Although the segment posted its fourth consecutive month of year-over-year gains, sales were concentrated in the $500 to $1,000 price range as well as the under $25 price range.

Still, sales rose 4.3 percent, surpassing the 3.5 percent increase in August.

The sales pattern may reflect the stimulative impact of the highly anticipated release of the "Halo: Reach" video game last month, Berry said. He explained that the release of popular games such as this one, can help drive sales of video game consoles and other related devices.

But weak sales of luxury items is worth watching.

Sales of luxury goods—including high-end restaurant sales, but not jewelry—fell by 5.4 percent from last September. This was the sector’s second consecutive month of year-over-year declines.

Online sales continued to be a bright spot in September, rising 7.8 percent from the same period last year. The pace also was more robust than in August. All subcategories except for jewelry contributed to the growth. However, September does not tend to be a strong month for jewelry sales.

Restaurants also had another good month, with gains in both full service and limited service restaurants.

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