Implications: Before you worry about a slowdown in consumer spending, keep in mind that retail sales still eked out a 0.1% gain in September despite a large drop (3.2%) in sales at gas stations due to lower gas prices. Excluding gas stations, retail sales increased a healthy 0.4%. Gas stations sales are now down a whopping 19.7% from a year ago. However, the volume (gallons) of gasoline sales are picking up - the incentive of prices on supply and demand works again. In the twelve months through July (the latest data available) Americans drove the most miles on record. Overall retail sales are up a modest 2.4% from a year ago, but 4.9% excluding gas. "Core" sales, which exclude autos, building materials and gas stations (the most volatile sectors) were up 0.1% in September and are up 3.7% from a year ago. Plugging today's report into our models suggests "real" (inflation-adjusted) consumer spending, on goods and services combined, will be up at a healthy 3.0 to 3.5% annual rate in Q3. Nonetheless, real GDP will likely grow just 1.5% in Q3 as inventories and trade hold back the aggregate data from reflecting healthy consumer spending.
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