The Economy

Retail Sales Point to Strong Holiday Season

While sales rose only 0.2% in October, the slowdown from September largely reflected the unwinding of hurricane-related consumer spending.
Matthew HellerNovember 16, 2017
Retail Sales Point to Strong Holiday Season

U.S. retail sales exceeded expectations in October and indicated stronger consuming spending in coming months, including the holiday shopping season.

The Commerce Department said retail sales rose 0.2% last month following a revised 1.9% gain in September. Economists had expected no change the big increase in October after the big increase the previous month in the high-spending aftermath of Hurricanes Harvey and Irma.

Sales excluding volatile items like autos, gasoline and other products like building materials, rose 0.3% in October, in line with expectations. Consumers had spent heavily on autos in September to replace hurricane-damaged vehicles.

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“The slowdown from September’s robust pace largely reflected an unwinding of the boost to building materials and gasoline prices after recent hurricanes,” CNBC reported.

Receipts at auto dealerships increased 0.7% in October after soaring 4.6% in September while sales at gardening and building material stores fell 1.2% after surging 3.0% in September, and service station receipts declined 1.2% following a 6.4% gain in September.

With strong sales of items like cars, furniture and electronics in October, economists are raising their estimates for spending in the fourth quarter. Richard Moody, chief economist at Regions Financial Corp., said he now expects the second-best holiday season since the end of the recession, with sales, adjusted for inflation, rising 5.7%. Last year, real sales were up 4.1%.

“Lower selling prices, higher labor costs, and having to cover shipping costs will pressure margins, which is why we expect this holiday sales season to bring more cheer to consumers than to retailers,” he told MarketWatch.

Ellen Zentner, chief U.S. economist at Morgan Stanley, now sees personal-consumption expenditures rising 3.5% in the final quarter of 2017, up from a 2.4% rate in the third quarter.

The October retail sales data “offer further evidence of strength in consumer spending and should bolster the argument for the Federal Reserve to lift interest rates in December,” The Financial Times said.