Rising oil prices push US September retail sales up 0.8% month-on-month, but consumer spending growth weak after excluding volatile items

The main driver of retail sales growth in September was gasoline stations, where sales surged by 6.4% month-on-month, the largest increase among the 13 categories. Among these, eight categories recorded growth, with furniture, electronics, and dining sales all improving. Spending at restaurants and bars rose 1.1% month-on-month.

However, beneath the overall numbers, there is clear divergence in consumption trends. According to analysts at Bank of America reviewing the bank’s September card data, while fuel spending accelerated, multiple key consumption categories softened, including: home improvement (-1.6%), department stores (-1.1%), apparel (-0.9%), furniture (-0.5%), dining (-0.4%), groceries (-0.2%), and online spending (-0.1%).

The "control group" sales, used to estimate GDP goods spending, saw a notable surge in August, but in September only grew by 0.1% month-on-month, indicating a significant deceleration in consumption momentum towards the end of the third quarter.

Nationwide, retail gasoline prices have remained above the politically sensitive $4 per gallon mark for three consecutive months, while diesel prices hover above $5 per gallon near historical highs, against the backdrop of ongoing global refining constraints.

Bank of America analysis shows that consumer fuel spending on credit and debit cards rose 5% month-on-month in September, a clear acceleration from 3.1% in August, while overall per-household card spending increased by just about 0.2% in the same period, far below the 1% increase in August, confirming that rising oil prices are squeezing consumption in other categories.

UBS analyst Ritu Solanki pointed out in a briefing on U.S. banking sector earnings on Wednesday that consumer spending, loan growth, and overall corporate activity remain healthy, with no broad signs of credit deterioration, though inflationary pressure persists.

Despite data showing increased divergence, several financial institutions remain relatively optimistic about the outlook for consumption. Reports indicate that Wells Fargo, JPMorgan Chase, and Citigroup all signaled that overall consumer resilience persists.

Meanwhile, some corporate executives have taken a more cautious view of the consumer environment. Both Domino's Pizza and Albertsons acknowledged during recent earnings calls that many consumers continue to face a challenging economic environment.

From a macro perspective, a robust job market, larger-than-usual tax refunds, and rising stock prices have been the main drivers of consumer demand this year. Additional data released Thursday show that initial jobless claims remain near historic lows, with no significant deterioration in the labor market yet evident.

However, ongoing inflationary pressure, persistently high oil prices, and the structural contraction in consumer categories continue to exert multiple layers of pressure on household budgets—an evolving trend that merits ongoing market attention.