U.S. retail sales advanced for the sixth month in a row in October but hopes for a strong holiday shopping season may be fading amid the surge in coronavirus infections.
The Commerce Department reported that retail sales rose 0.3% last month. It was the smallest gain since the economic recovery from the pandemic started in May and followed a 1.6% increase in September.
Economists polled by Reuters had forecast a 0.5% gain in October. Retail sales rose 5.7% on a year-on-year basis in October and are above their February level, with the pandemic shifting demand away from services to goods.
Sales were supported by Amazon’s “Prime Day” event, with online receipts surging 3.1%. But if auto dealers and gasoline stations are excluded, sales climbed a lackluster 0.2% in October and economists expect moderate retail sales growth for the rest of the year.
“The return of cold weather and record increase in coronavirus cases poses another stiff test,” MarketWatch said, adding, “If the situation gets any worse, retailers are likely to face the bleakest holiday shopping season since the end of the Great Recession more than a decade ago. “
“It looks like consumer spending is increasingly turning into a headwind for this recovery from the worst economic downturn since the Great Depression,” said Chris Rupkey, chief economist at MUFG in New York.
Sales of electronics and appliances, as well as building materials and garden equipment, increased in October but consumers bought motor vehicles at a much slower pace than in previous months and households cut back spending on sporting goods and hobbies, clothing, furniture, drinking and dining out.
“Restrictions and consumer avoidance of crowded places like bars and restaurants could undercut spending and trigger another wave of layoffs, further squeezing incomes following the loss of a government weekly unemployment subsidy,” Reuters said.
Millions more will lose benefits next month when government-funded programs for the self-employed, gig workers, and others who do not qualify for regular state unemployment and those who have exhausted their six months of eligibility expire.
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