A Strong Retail Number, and the Gas Pump Behind It

The headline is easy to like. Retail sales rose 0.8% in September to $745.0 billion, up 6.3% from a year earlier, according to the Census Bureau.

Now read the second line, because that is where the story is.

Excluding gas stations, sales rose only 0.2%. Gas stations themselves jumped 6.4%. A big part of that strong number, in other words, is people paying more at the pump, not people buying more.

One more caveat: these figures are not adjusted for inflation. They show dollars spent, not how much was bought. A dollar that goes toward fuel is a dollar that doesn't go toward something else.

What I hear from clients

In Los Angeles, that gap between the headline and the underlying number is familiar. Plenty of households look fine on paper and feel stretched in practice. When a budget absorbs a higher gas bill, the first things to give are usually the discretionary ones. And a monthly housing payment is the least discretionary of all.

So when you see a number like 0.8%, ask what is inside it. Strength that comes from a single category is not the same as broad confidence.

The small bright spot

Furniture and home stores rose 1.3%, the strongest of the categories mentioned in this report. I would not build a thesis on one month of data. But it is a mild positive for the parts of real estate that happen right around a sale: staging, refreshing a room before photos, and furnishing a place after the keys change hands.

If you are planning to sell, that is worth a thought. A home that shows well, with a kitchen and dining area that look lived in rather than empty, still gives buyers something to picture. If you are buying, it suggests that some people are spending on their space.

What to watch

The Census Bureau's next release is November 17. I will be looking at the same two things: the headline, and what happens when gas is taken out. If the second number catches up with the first, that is a real sign of strength. Until then, I would read September as a good-looking number with a fuel bill attached.