Oct 18, 2023 - Economy

If you pay Americans money, they will spend it

Data: U.S. Census Bureau, FactSet; Chart: Axios Visuals
Data: U.S. Census Bureau, FactSet; Chart: Axios Visuals

Americans continue to spend the fruits of their labor: Retail sales crushed expectations in September.

Why it matters: The U.S. economy is roughly 70% consumption, so if you want economic growth, consumers have to keep spending.

The latest: They clearly are. Retail sales numbers for September arrived far better than expected, in what Axios Macro's Neil Irwin calls a "blockbuster" report.

  • Sales jumped 3.8% compared to last September.
  • Online sales were up 8.4%. Receipts at eating and drinking establishments, up 9.2%.

Yes, but: These retail sales numbers are not inflation-adjusted, meaning that a lot of the increase over the last year reflects the 3.7% rise in the Consumer Price Index over the same period.

Thought bubble: Maybe this whole economics thing ain't rocket science.

  • By all accounts, the U.S. labor market is incredibly strong, with an unemployment rate that's been under 4% for almost two years.
  • Wage growth is solid — hourly earnings were up 4.4% compared to last year — and with inflation easing, real disposable income is up. That means that on the whole, people are better off than they were last year when inflation crushed real earnings.

The bottom line: People are spending their money. And in an economy based on people spending their money, that's good.

Go deeper: Why markets shouldn't sweat the blockbuster jobs report

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