Retail sales up 0.8% in September, but a big chunk of spending went to paying gasoline bills

U.S. inflation continued its upward trend in September, driven largely by surging energy prices, according to recent reports from the Labor Department. Producer prices rose 1.3 percent last month, marking the largest increase since March 2022, while the year-over-year increase reached 6.3 percent. This follows the release of the consumer price index, which showed inflation climbing to 3.7 percent annually. The rise in prices extended beyond energy, with goods prices increasing 2.6 percent in September and 9.8 percent over the past year. Energy accounted for more than 80 percent of that increase, with gasoline prices soaring 20.3 percent. Diesel prices for intermediate demand rose 21.0 percent, contributing to a 3.4 percent increase in the transportation and warehousing price index for the month. Year-over-year, transportation and warehousing prices are up 16.0 percent. Even when excluding food and energy, the producer price index for goods still rose 0.3 percent in September, with a year-over-year increase of 5.1 percent. Durable consumer goods prices rose 3.6 percent from a year ago and 0.3 percent in September. The consumer price index showed a 0.9 percent increase in durable goods for the month, although year-over-year growth remained flat. A special index for personal consumption goods excluding energy rose 0.4 percent in September, but only 1.7 percent from a year ago. Services prices increased 0.8 percent last month, with a year-over-year increase of 4.9 percent. When excluding trade services, transportation, and warehousing, the monthly increase dropped to 0.3 percent, with a year-over-year increase of 3.8 percent. The core producer price index, which excludes food and energy, rose 0.7 percent, exceeding expectations of 0.3 percent. A measure excluding food, energy, and trade services increased 0.5 percent and was up 5.0 percent over the year. Retail sales rose 0.8 percent in September and were up 6.3 percent from a year earlier. However, much of this increase was attributed to higher gasoline prices, with gas station sales rising 6.4 percent. Excluding gas stations, retail sales rose 0.2 percent in September and are up 4.5 percent from a year ago. Despite rising prices, consumers continued to spend, with grocery store sales increasing 0.5 percent, even as grocery prices fell slightly. Furniture store sales jumped 1.3 percent, and electronic store sales rose 0.6 percent. Health and personal care store sales increased 0.7 percent, and sales at bars and restaurants surged 1.1 percent. The average price for regular gasoline rose to $4.33 per gallon, according to AAA. Rising prices pose challenges for shoppers, particularly as the consumer price index rose 3.7 percent in September compared to a year ago. On a monthly basis, costs jumped 0.6 percent from August to September, the largest gain in five months. Natalie Kotlyar, national leader of BDO's retail and consumer products practice, noted that while September's growth indicates continued consumer spending, it does not reflect broad economic strength. She emphasized that with inflation above 3 percent and high gas prices, part of the increase is due to higher prices, and many shoppers are relying on savings and promotions to manage their budgets.