Down retail sales in September. One-month blip, or is weakness spreading?

Remember how I’ve mentioned that consumer spending has kept our economy afloat as other areas have sputtered? Well, this news should make you say “Uh oh,” as the consumer took a break as the 3rd Quarter of 2019 ended.

Retail sales dropped in September by the largest amount in seven months, possibly signaling that rising trade tensions and turbulent markets are having an impact on consumer spending.

Retail sales fell 0.3% last month following a 0.6% gain in August, the Commerce Department reported Wednesday. It was the first decline since a 0.5% drop in February.

That higher revision for August (it was originally marked at +0.4%) makes me wonder if part of these figures are related to Aug 31 being on Labor Day weekend this year while it was entirely in September for 2018. But if you combine the two months, it’s still a pretty tepid increase for the last 2 months of Q3 2019.

Some of this decrease in retail sales was attributed to the recent drop in gasoline prices, but the weakness was pretty widespread.

In addition to the drop in gasoline sales, sales of autos fell 0.9% in August after a solid 1.9% increase in August.

Sales at department stores were down 1.4% while sales at general merchandise stores, which include chain retailers such as Walmart and Target, fell 0.3%.

Sales also dropped at hardware stores, grocery stores and sporting goods stores. Clothing stores, restaurants and health care stores all saw increases.

The general merchandise stores still had minor increases in the quarter. The same cannot be said for department stores, as they dropped during back-to-school shopping season in August, and their sales are significantly down compared to last year.

Department stores retail sales
Sept 2019 -1.4%
Aug 2019 -1.2%
Q3 2019 vs Q2 2019 -1.5%
Sept 2019 vs Sept 2018 -6.1%

They're not going here any more

But it’s also odd that the structural change that has helped to kill traditional retail also declined in September, as sales at “non-store retailers” (aka Amazon and other online businesses) also dropped last month by 0.3%. It could be a one-month blip, as non-store retail sales are still up nearly 13% year-over-year, but if that sector starts slowing, we got real problems in this economy.

There was also significant weakness in the auto sector, as that declined by 1% for September. Now if you’re going to have a time for an auto-buying slowdown, having it come during the GM strike is a decent time, since it might get more cars off the lot even with the slower sales (congrats on reaching a tentative agreement, by the way). Auto sales were strong in August, so maybe it’s a calendar thing, but the last 3 months of the year seem critical here.

It’s not that these down retail sales for September means recession is imminent, indeed it may be one-time deal and the consumer could continue to carry the economy for Q4 2019 and beyond. But it certainly seems to be a flashing yellow light to me on top of manufacturing going into decline and job growth slowing. Just gotta and wait and see for the data in the coming weeks, I guess.