Chicago Fed: High-income groups supporting consumer momentum, September US retail sales may continue to grow

The latest Retail Trade Estimate Survey (CARTS) released by the Chicago Fed shows that US retail sales in September (excluding automobiles and parts) may continue to grow, although some of the increase reflects the impact of price hikes. According to data released by the bank on Wednesday, seasonally adjusted retail sales in September are expected to increase by 0.5% month-on-month, slightly lower than the 0.7% growth in August. The report is intended to provide an early indicator for the official retail sales report from the US Bureau of Economic Analysis. However, due to the ongoing government shutdown entering its third week, the official retail sales data that was scheduled to be released on Thursday will be delayed. After adjusting for inflation, the Chicago Fed estimates that actual retail sales in September (excluding automobiles) only increased by 0.2%, lower than the 0.3% growth in August. This estimate is broadly in line with the predictions of most independent economists. The report points out that retail spending in the US is still mainly driven by high-income households. As financial markets and real estate wealth grow, this group of people's financial situation remains robust, and wage growth also remains strong. In contrast, middle and low-income households are facing more pressure. Economists say that the middle-income group is facing a double squeeze from rising prices and tightening credit conditions, while low-income households are more directly affected by slowing job growth and weak wage growth. In addition, they also bear the higher costs of imported goods due to tariff increases. Will Auchincloss, head of the Americas retail industry at EY-Parthenon, pointed out, "Consumers are increasingly tired of high prices and are spending more cautiously in a more challenging economic environment. We expect households to focus more on value and essentials and reduce discretionary spending." Data from the Bank of America Research Institute shows that spending by low-income households in September increased by only 0.6% year-on-year, while spending by middle and high-income households increased by 1.6% and 2.6% respectively. The institution said that consumption by high-income groups is not only being driven by wage growth but also by the "wealth effect": "When the S&P 500 index rises, the increase in disposable income for the top 5% of households is usually significantly higher than that of the middle-income group."