September retail sales were weaker than consensus expected (+0.2% m/m) but slightly better than our expectation (0.0% m/m). Overall, retail sales increased 0.1% m/m but this was driven primarily by strong auto sales, as sales ex autos declined 0.3% m/m and August retail sales were revised down to 0.0% from 0.2%. The control group (ex food, gasoline, building materials and autos) declined 0.1% m/m and there were downward revisions to both the August figure (now 0.2% vs 0.4% previously) and July's, now 0.5% vs 0.6% previously.
Adjusting for inflation, we estimate that real personal spending increased a still healthy 0.3% m/m in September and taking revisions to the control group into account, Q3 private consumption growth is now tracking 3.2% q/q AR in Q3 but with momentum slowing somewhat into Q4.
Looking ahead, the boost from lower oil and gasoline prices will diminish in the coming quarters. Although real income growth remains healthy, slower job growth will dampen disposable income growth as long as the expected increase in wage inflation does not materialise. That said, the household savings rate remains high compared to net wealth and there is room for some moderation. We look for private consumption growth of around 2.5% q/q AR in the current and coming quarters.
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