Retail sales data offers health-check on consumer, inflation pressures as economy defies recession calls

The Commerce Department will publish its monthly estimate of U.S. retail sales Tuesday as investors look for a health-check on the biggest driver of U.S. economic growth and possibly another sign that inflation pressures are building into the autumn months.

Economists expect September retail sales to rise around 0.3% from the month of August, when total receipts were pegged at $698 billion, with the month-on-month increase in gasoline prices only partly adding to the topline gain,

Energy Department data shows the national average rose by just 0.04 cents, to $3.958 per gallon, a marked slowdown when compared to the 10.3% surge that occurred over the month of August.

That could leave extra room for spending in discretionary categories, such as restaurants and apparel stores, as consumers continue to defy slowdown forecasts amid an historically resilient labor market that looks to offset renewed inflation concerns.

However, the closely-tracked control group number, which excludes autos, building materials, office suppliers, gas station sales and tobacco and feeds into the government's GDP calculations, is forecast to fall 0.5% from August following gains of 0.1% and 0.7% over the summer months.

Consumer optimism in to the autumn is starting to soften, as well, according to the preliminary October reading of the University of Michigan's benchmark survey, which showed a sharp decline in overall sentiment and a pick-up in one year inflation expectations.

"Our base case, then, is that headline retail sales are unchanged in September, thanks to a jump in food service sales and a price-driven increase in gas stations' sales but that would still be the worst print since March, when sales fell 0.9%," said Ian Shepherdson of Pantheon Macroeconomics. "Moreover, the loss in momentum in September would put consumers' spending on a poor footing at the start of the fourth quarter."

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