Lower fuel prices led to an increase in retail sales, particularly in nondurable goods, according to a recently released economic report.
“Retailers had a very positive month in September as consumers took the opportunity provided by lower fuel costs to prove once again that they are more resilient than analysts tend to recognize,” according to report released Friday by the Wachovia Corp. Economics Group.
Sales, excluding gas stations, rose to a three-month annualized pace of 5.4 percent in September, up from a comparable rate of 1.7 percent in August, the report states. Further excluding the auto sector, sales increased 5.2 percent over the last three months.
Nondurable goods retailers reaped the greatest benefit from lower fuel costs, according to the report. Clothing stores posted a 3 percent gain in September and are up 11 percent over the last three months, Sports store sales increased 1.1 percent, and department store sales rose 1 percent. Sales at stores with more of a durable-goods focus managed to show some gains, but the increases were not nearly as strong.
“Sales at durable goods retailers will likely continue to fall short of the pace of sales at nondurable goods locations for a number of reasons: chief among them – interest rates,” the report says. “The lagged effect of higher short rates has already started to affect sales at these retailers. Durables tend to be bigger ticket items and are often financed, so higher financing rates will likely make consumers think twice about laying down the plastic for these purchases. In contrast, an extra $50 at the pump translates fairly easily to picking up an extra sweater at the mall or an extra dinner out.”
The report states that gas prices should be stable in October. However, wage growth has exceeded the pace of retail sales for the last five months.
“Higher wages may be just the thing consumers need to push through the holiday season,” the report states.