September Retail Sales: Another Solid Increase

Retail sales posted another respectable advance in September, the Census Bureau reports. The 1.1% rise last month matches the previous gain, which was revised up. It’s been a number of years, in fact, since we’ve seen back-to-back 1%-plus gains in retail sales on a monthly basis. Today’s retail sales update is just one data point, of course, but it echoes the narrative that I’ve been discussing on these pages for some time: the economy continues to chug along, expanding modestly. That implies that recession risk remains low. (For a broad review of the data behind this view, see last week’s updates of The Capital Spectator Economic Trend Index and the Q3 GDP nowcast.)

Even after stripping out the volatile auto sector, or the potentially distorting data from gasoline sales, consumption still rose handsomely last month. Retail sales ex-autos jumped 1.3% in September and retail sales ex-gasoline advanced 1.0%.

More importantly, the year-over-year change in retail sales continue to rise. For the third month in a row, the annual pace strengthened. Through September, retail sales gained 5.2%. That’s an encouraging signal for expecting that the economy will remain in a growth mode for the immediate future, and it offers a fresh batch of quantitative support for what a broad read of the numbers has been telling us all along.

With today’s retail sales report, we’re about halfway through the September updates. So far, the numbers continue to offer convincing evidence that recession risk isn’t a real and present danger. (I’ll have a full update on all the numbers later in the week via The Capital Spectator Economic Trend Index and a new GDP nowcast). Meantime, the case for slow growth, perhaps slightly better than in recent history, remains a convincing outlook.
What might derail this relatively rosy outlook? Take your pick. Any number of problems could create trouble for the economy. Indeed, it’s easy to come up with several plausible scenarios that slap the macro profile to the point that growth evaporates rather quickly. At the top of the list of potential catalysts:
* Congress allows fiscal cliff risk to drag us over the edge
* The slowdown in emerging markets deepens
* The euro crisis takes (another) turn for the worse
* One or more of the various hot spots in the Middle East deteriorate and send energy prices skyrocketing
Yes, there’s plenty to worry about, although on one level that’s always true. For now, the numbers in hand tell us that the U.S. economy continues to grow, sluggishly perhaps, but growth nonetheless. When that changes, the incoming data will tell us so, in relatively clear terms. And, yes, you’ll read about it here. Meantime, let’s acknowledge what’s obvious in the numbers: recession risk, according to the latest numbers, is still low.