Retail sales are growing, but one problem poses a major economic threat

U.S. retail sales growth was flat in September, but disparities in growth may signal another wave of inflation.

Despite several restaurant chains filing for bankruptcy this year and various retailers reporting lower sales due to lower customer spending and economic uncertainty, September appeared to offer the retail sector little hope for the future.

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According to the US Census Bureau’s monthly sales report for August 2024, retail and food service sales rose slightly by 0.1% from the previous month and by 2.1% from a year earlier.

Total sales increased by 2.3% from June 2024 to August 2024 compared to the same period last year.

Retail sales rose 0.1% from the previous month and 2% from a year ago.

Non-store retailers grew 7.8% and food and beverage services grew 2.7% from last year.

However, as great as these economic inclinations may seem, other areas remain disproportionate and can signal some red flags.

Costco shoppers are looking for the best deals on bulk items

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Customers are making deeper holes in their pockets due to price hikes

While sales may have picked up slightly, growth disparities persist in the labor sector and prices are at an all-time high.

According to the S&P Global Flash US Composite PMI Output Index, economic expansion in the US was sustained in September.

The Composite Manufacturing Index for September was reported at 54.4 this month, down just 0.02 points from 54.6 the previous month, but remaining above 50, further indicating expansion in the private sector.

However, the average price of goods and services rose at the fastest pace in six months.

Related: Markets call for big Fed rate cut after inflation reports

The price increase is attributed to rising input costs in the services sector, which reached a 12-month high.

Although companies refrained from hiring, causing employment to decline for the second month in a row — and four times in the past six months — retail wages rose.

U.S. wages and salaries rose nearly 4.4% in July 2024 from a year earlier and are expected to rise nearly another 4% through 2025, which seems unsustainable if prices are to rise even more.

S&P Global warns the Fed of some red flags in the economy

Because of this sudden rise in prices, the fear of a future increase in inflation seems more likely in the coming months.

The 2.2 percent GDP growth rate in the third quarter still met expectations for a healthy economic recovery, but S&P Global said concerns over a weakening manufacturing sector, a sluggish labor market and declining business confidence must be monitored.

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On September 18, the Federal Reserve (Fed) issued a statement about cutting interest rates by 50 basis points to 4.75% to 5%, the first such move since the 2020 pandemic.

“Early survey indicators for September point to an economy continuing to grow at a solid pace, albeit with a weakened manufacturing sector and heightened political uncertainty acting as substantial headwinds. A re-acceleration in inflation is also being signaled, suggesting the Fed may not completely shift its focus away from the inflation target as it tries to support the economic recovery,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

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