Retail and food services sales rose by 0.3 percent in October to $553.3 billion, according to a report out this week from the U.S. Census Bureau. That was the smallest increase of the reopening, slightly worse than the consensus estimate, and the previous month’s gain was revised lower. “Core” retail sales, which exclude the volatile automobiles and energy components, also disappointed forecasts in October (0.2 percent vs. 0.5 percent), as did “control group” retail sales (0.2 percent vs. 0.4 percent) which better track consumer demand trends, and both gauges similarly saw their September gains revised lower. Although the headline figures were clearly a disappointment a moderation in retail sales growth was inevitable given how rapid the recovery has been following the lifting of the lockdowns earlier this year, especially considering that total consumer spending had already eclipsed the pre-pandemic record by June.
Even after October’s “slowdown” retail sales are still growing at a 3-month pace that is more than double what was typically seen throughout the previous decade, and annual rates of growth are now basically in line with the long-term average. Further, a look under the hood reveals that the biggest detractors from total sales last month were spending at clothing retailers and sports and hobby stores, likely some continued post-summer, post-back-to-school giveback as well as a nascent consumer response to the latest wave of the coronavirus. The latter is supported by nonstore retailers (Amazon and other online merchants) being the main driver of sales growth in October, and the strong spending seen at electronics stores last month could be a sign of consumers anticipating a return of lockdowns and other activity restrictions. Whether or not these trends persist will of course depend on how successful our nation’s fight against the pandemic is, and although the recent string of vaccine efficacy headlines have been very encouraging it could be many months before any widescale supply actually becomes available. The timeline of a vaccine could also have a big impact on the size and scope of subsequent stimulus packages passed by Congress because the sooner the risks of widespread lockdowns and other rolling restrictions are removed the more lasting the benefits will be of any money pumped into the economy.
Sources: Econoday, U.S. DoC, FRBSL