Data released on Friday showed retail sales remained unchanged in September compared to August. Stripping volatile retail segments suggests some modest upward risk to third-quarter goods spending, explain analysts at Wells Fargo. They point out that the report adds to recent evidence that consumer staying power may be waning, but it's showing few signs of breaking.

Key Quotes: 

“Consumer goods purchases are slowing, but not collapsing. Inflation-adjusted retail sales have more or less moved sideways for the past year and a half; an impressive feat when inflation is running at a 40-year high.”

“The next few months of spending are going to be influenced by a few factors. As consumers start to spend for the holidays, goods spending may see another near-term boost, and it will likely show up somewhat in the October data as households pull purchases forward. That, however, may be modestly offset by the effects from Hurricane Ian which made landfall in Florida on September 28. This disruption may be more apparent on the services side of spending.”

“Households have broadly looked past elevated inflation and continued to spend by relying on their balance sheets and accumulated savings. We expect overall spending to continue to moderate as inflation persists and tighter monetary policy begins to weigh more meaningfully on consumption.”