Retail Sales Solid In September

Retail sales proved solid in September hitting the Econoday consensus across the board: total up 0.6 percent, ex-auto up 0.5 percent, ex-auto ex-gas up 0.3 percent. Auto sales as expected are the highlight of the report, up 1.1 percent to reverse the prior month's 0.3 percent decline. Auto sales, a discretionary category, have been solid this year though down from last year's peak. Restaurants, another discretionary category, are also strong, up 0.8 percent to add to August's 0.7 percent gain.

Other positives include two related to housing, furniture which rose 1.0 percent and building materials & garden equipment, up 1.4 percent. This latter reading will give a boost to the residential investment component of the third-quarter GDP report.

This whole report in fact will give a lift to GDP, providing a quarter-end pop to consumer spending which was soft in the quarter's first two months. Strength in retail sales ultimately reflects strength in the labor market and today's report will further build expectations for an FOMC rate hike at the December meeting.

Recent History Of This Indicator:
After a strong second quarter, retail sales slowed sharply in July and August. But, boosted by a surge in unit auto sales, forecasters see a bounce for September, up what would be a very solid 0.6 percent for the total headline. Excluding autos forecasters see only slightly less strength, at a consensus plus 0.5 percent. But when excluding autos and gasoline, forecasters are calling for a more moderate but still constructive 0.3 percent increase.