(TNND) — A "better than expected" retail sales report released Thursday is more evidence that the strength of the American consumer should not be underestimated, a Bankrate expert said.

The Commerce Department’s September report on retail and restaurant sales showed a 1.7% annual increase for a total of $714.4 billion.

That was up 0.4% from August, which was up 0.1% from July.

“All things considered, the fact that these sales are continuing to grow month after month and year after year is impressive,” Bankrate Senior Industry Analyst Ted Rossman said. “Because you can easily foresee a scenario where these numbers are negative. You think about high inflation, high interest rates, all these things weighing on consumers. Even if these sales have not been knocking the cover off the ball this year, they've been rising consistently.”

The National Retail Federation said consumers are still willing to spend where they see value.

“September sales come amid the recent trend of payroll gains and other positive economic signs,” NRF Chief Economist Jack Kleinhenz said in a news release. “Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”

The NRF earlier this week released its annual holiday sales forecast, calling for between 2.5% and 3.5% growth after 3.9% growth last year.

The September retail report from the government showed “nonstore retailers,” which are the report’s best proxy for online shopping, up 7.1% from last year.

Food services and drinking places were up 3.7% from last year.

Gas station sales were down 10.7%, mostly due to lower prices, Rossman said.

Sales at electronics and appliance stores fell 4.6%.

Rossman said it’s important to note what is and what isn’t included in this Commerce Department report.

It’s mostly physical goods, which Rossman said has been a tougher sell the past few years.

Dining is covered in this report, but not travel, sports tickets and other forms of “experiences” spending.

“We're starting to see a more normal pattern” of consumer spending after a big swing towards physical goods for the home during the early part of the pandemic, followed by a big swing towards experiences as people yearned to eat out, travel and the like, Rossman said.

Some of that excitement over spending on experiences seems to be coming back down to earth.

For instance, bar and restaurant sales were up 3.7% in this report.

“Which not too long ago were growing double digits year over year,” Rossman said.

ELECTION & HOLIDAY SEASON

We have an election in less than three weeks, and the economy is the top issue on the minds of voters.

Under the umbrella of the economy, a Bankrate survey showed the top issue is inflation.

Even though the rate of inflation has come down, prices are still high. And that's what matters to voters, Todd Belt, the Political Management program director at George Washington University, said Wednesday.

Annual inflation peaked at 9.1% in June 2022.

At roughly the same time, Federal Reserve monetary policymakers began ratcheting up their benchmark interest rate as a lever to tame inflation.

After a series of 11 interest rate increases between early 2022 and last summer, the Fed finally reversed course last month and began cutting rates.

The rate of annual inflation, as measured by the consumer price index, is now 2.4%.

Wage growth has gone up, and it's actually outpacing inflation in the past year, Rossman said.

Typical wage growth is 4.7%, according to the Atlanta Fed's tracker.

But wages haven't fully caught up to inflation, according to Bankrate.

A report last month showed prices have risen 20% and wages are up 17.4% since the beginning of the post-pandemic inflation surge in 2021.

Rossman said the holiday sales forecast from the NRF is in line with his expectations, that sales growth will be in line with inflation.

“It fits into this perception that people are spending more, (but) they don't necessarily feel like they're getting more,” he said. “Which brings us back to that inherent contradiction in the economy. Where it's like, ‘Are things good? Are they bad?’ A lot of the data has been pretty good. A lot of the sentiments been lagging. It's really because people feel like they're spending more, but they're not getting more.”

ONLINE SALES

A bright spot in both the September sales report and the holiday forecast is online shopping.

Nonstore retailers, the best fit for an e-commerce figure in the retail sales report, were up 7.1%. That’s compared to the 1.7% overall annual increase.

The NRF forecast, which calls for an overall increase of 2.5% to 3.5%, expects online sales to rise between 8% and 9%.

“E-commerce really skipped a few steps during the pandemic,” Rossman said. “I mean, for a while it was kind of the only game in town. What's interesting, though, is people haven't looked back.”

Rossman said there’s also a notable shift within the e-commerce world toward mobile shopping, as opposed to shopping via a desktop or laptop computer.

The ubiquity of phones and the improved small-screen experiences have mobile shopping looking like a big trend this holiday season, Rossman said.

Shopping on mobile devices is expected to hit a new milestone, jumping 12.8% from last year for an estimated $128.1 billion this holiday season, Adobe said in its online holiday shopping forecast.

“You could actually view online shopping as a bit of an inflation-buster,” Rossman said. “I think that's another thing besides just the convenience. The fact that it's all in one place. And you can easily comparison shop, and you can use browser extensions to find the best deals.”