US spending in retail establishments rebounded in September, rising 0.6% vs. the previous month—the strongest monthly gain since June, according to this morning’s release from the Census Bureau. The rise more than reverses the 0.2% decline in August. Meanwhile, the upbeat data lifted the year-over-year gain to 2.7%, a three-month high. In short, the worrisome profile of the retail sector in August pulled back from the brink.

Headline spending’s annual trend may be improving, but the year-over-year gain less gasoline sales still looks modest vs. the gains posted over the past year or so. Spending ex-gas continued to rise at 3.2% through September, roughly unchanged from August’s pace. That’s a decent advance, but as the chart below shows it’s relatively muted vs. the numbers from last year and it’s not obvious that the deceleration has that’s been in play for some time has ended.

The takeaway: headline figures imply that a revival in the growth rate may be unfolding, although stripping out gasoline sales from the data takes some of the shine off of that narrative.

Nonetheless, some analysts remain confident that sales will continue to print at healthy growth rates for the near term. “The combination of solid job growth, while slowing, modest pickup in wages, and pretty good measures of household net worth should continue to push consumer spending up over the next year,” advises David Berson, chief economist at Nationwide Insurance.

Pessimists can argue the point, with a bit of support from today’s preliminary update on the mood on Main Street in October. The University of Michigan’s Index of Consumer Sentiment tumbled to 87.9 for this month, down from September’s 912 and 2.3% below the year-earlier reading. The softer print is the second lowest level in the past two years.

Nonetheless, today’s spending numbers for September leave enough on the table for the bulls to counter that the macro outlook, while not stellar, is strong enough to keep business-cycle risk to a minimum.

Whether there’s enough fuel to convince the Federal Reserve to raise interest rates this year is still open for debate. The policy sensitive 2-year Treasury yield and the benchmark 10-year rate are off their highs for the week at the moment (mid-morning on Friday). But there’s nothing in the retail sales report to alter sentiment, which has recently been pointing towards a rate hike in December. As CNBC reported earlier today:

The futures market implies odds of about 65 percent for a hike at the central bank’s December meeting.
“To me, that seems quite appropriate,” said Boston Federal Reserve President Eric Rosengren, a voting member this year on the central bank’s policymaking panel and one of three dissenters at the September meeting, when the Fed held rates steady.
“GDP growth looks like it’s going to be strong enough in the second half of the year to … [keep] the unemployment rate drifting down,” he said, adding he’s not worried about inflationary dangers from rising wages and prices.

The next opportunity to confirm or reject that view: Monday’s macro releases on industrial production for September and an early look at manufacturing activity in October via the New York Fed’s Empire State Manufacturing Survey.