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Business spending data shows there could be possible upside surprise in retail sales

• Consumers continued to shop a lot, driving online sales sharply higher, and spending dollars at home remodeling stores, general merchandise retailers and grocery stores.
• September retail sales are expected to be strong, rising O .7% and edging above the level consumers spent a year ago, but business-to-business spending data suggests it could be even stronger.
• Retail spending is one area of the economy that has had a V-shaped rebound after the economic shutdowns in March and April.

Consumers continued to spend money on their homes and shopped online in a big way in September.
Economists expect retail sales rose by 0.7%, another good month, which should show the recovery in retail continues to look like a V-shaped rebound in consumer spending. Excluding autos, sales were expected to rise by 0.4%, according to economists polled by Dow Jones. Retail sales data is reported Friday at 8:30 a.m. ET.

Mark Zandi, chief economist at Moody’s Analytics, said he’s studied business-to-business spending for September, and he now expects a jump of 1.5% for September retail sales, twice the consensus.

“I think there’s some seasonal factors that will juice things up,” he said. Zandi said business-to-business spending data, provided by software firm Cortera, suggests consumer spending could have been stronger-than-expected, if they mimic business spend.
“I think it’s much the same – very strong growth in building materials and supply stores – the Home Depots and Lowe’s. Work-from-home is still driving a lot of demand in electronics and computers,” said Zandi. “Food and beverage is still solid. People are eating more at home than at restaurants and that is juicing retail sales. General merchandise is showing good, respectable growth.”

Cortera tracks $1.5 trillion of the total $8 trillion in annual business-to-business interactions, from data provided by suppliers. Cortera’s data showed a 42% gain in online sales over last year in September. Spending by electronics and appliances stores was up 48 .7%, and building materials and garden equipment retailers’ spending rose by 37% from last year.
Cortera, in conjunction with Moody’s Analytics, has a data tracker that can give insight into the status of the economic recovery after the pandemic-related shutdowns.
“All retail is up year over year 13%. Last month it was up 7 .6%,” said Jim Swift, CEO of Cortera. “The month before it was up 7% and before that it was down. It’s gone from negative to positive.” Spending by restaurants and drinking places was down 21.5% in September, but food and beverage stores spent 11.9% more in September than last year. Spending by gasoline retailers was virtually flat, up just O .7% and apparel store spending rose 1.3%, positive for the first time since the March shutdowns.

“We’re all kind of sitting at home, on our back decks. We’re not traveling. We’re not going to restaurants, not going to the movie theater, and we’re using the cash we have to buy stuff,” said Zandi. He said he expects some impact from coronavirus stimulus for consumers may still be trickling through the economy, but it should run out and September sales may be the better than October.

He said some consumers are still using the $1,200 payment received in coronavirus aid to pay bills, but the impact of that and extra benefits for those on unemployment has already started to fade.
“I think the effect of that is getting washed out by the higher income households that are working. They’re drawing a paycheck. They’re enjoying the stock market,” he said. “That drag from the lack of [unemployment payments] is going to intensify.”

With Patti Domm @CNBC