Retail Sales Sluggish in September—Except at the Pump

September’s retail-sales strength was largely illusory, while underlying consumption remains resilient but inflation has not yet resumed a convincing slowdown.

• Headline retail sales rose 0.8% in September, driven mainly by a 9.1% increase in gasoline prices and a 6.4% rise in service-station sales.
• The control-sales measure increased only 0.15%, slightly below Western Asset’s estimated 0.20% rise in control-item prices, implying little or no real growth during the month.
• Control sales followed a sharp August increase and a reported July decline, but sales since December 2025 appear stronger than the pace recorded during 2025.
• Census Bureau benchmark revisions materially reduced control-sales growth for 2022–2024 and made January 2026’s decline much worse, with drug-store sales down 8.2% rather than the previously reported 3.0%.
• September drug-store sales remained 1.7% below December 2025 levels even though BEA data showed pharmaceutical and sundry spending well above that level, raising questions about the reliability or allocation of drug-store data.
• Core inflation excluding shelter shows no acceleration, but also no clear deceleration, while shelter inflation has edged higher in 2026 after slowing during 2023–2025.

Takeaway: Investors should look through the gasoline-driven headline sales gain and short-term retail volatility, but the combination of steady real consumption and sticky inflation offers little reassurance to the Federal Reserve.