After two months of robust growth, U.S. retail sales cooled in November but retailers are still anticipating a solid holiday season.
The Commerce Department said retail sales increased 0.1% to $465.5 billion last month after gaining a revised 0.6% in October and 1.% in September. Economists had been expecting growth to slow to 0.3% in November.
But November sales were up 3.8% from a year earlier, the second strongest annual gain since January 2015. The weakness in the month-to-month increase reflected in large part the biggest drop in sales at auto dealers in eight months.
Holiday spending is “off to a solid start,” Gus Faucher, economist at PNC Financial Services Group, told The Wall Street Journal. “However, gains for traditional retailers will be much weaker due to the increasing reach of online sales.”
Retailers said uncertainty over the Nov. 8 election also caused shoppers to be cautious early in the month. The week of the election “was worse than a snowstorm in terms of nobody wanting to go out and buy stuff,” Costco Wholesale CFO Richard Galanti said.
Home furnishings, groceries and gasoline were among the categories that showed strength in November while restaurant sales shot up 0.8%, the biggest gain since February.
But auto purchases, which account for about 20% of retail spending, dropped 0.5%. “Auto dealers have resorted to deeper discounts to lure customers as demand levels off after years of surging sales,” MarketWatch noted.
If autos are excluded, overall retail sales rose a somewhat stronger 0.2%.
Department store sales, which have been losing ground to e-commerce, slipped 6.4% from November 2015 and sales at electronics and appliance stores fell 3.8% from a year earlier and general merchandise purchases fell 1.3%.
Sales at nonstore retailers were up 11.9% compared with a year earlier. “That suggests online sellers are grabbing a bigger share of holiday sales,” the WSJ said.