Report: October retail sales hit 2-year high

Dive Brief:

Retail sales increased 0.8% in October to reach $465.9 billion, rising 4.3% from the year-ago period to reach a two-year high and beating economists’ forecast, according to a Tuesday report from the U.S. Department of Commerce.
Core retail sales (excluding food services, auto dealers, home-improvement stores and service stations), also rose 0.8%, the largest increase since April. September’s gain was also revised up to a 0.3% gain (from a 0.1% gain) in that measure.
Apparel sales rose 0.6% in October, electronics and appliances sales rose 0.2% and non-store (e-commerce) sales rose 1.5%. Department store sales fell 0.7% and home goods and furniture store sales fell 0.9%

Dive Insight:

Retail sales in October bettered themselves in 11 of 13 major categories followed by the Commerce Department, a sign that the improvements in employment and wages are finally showing up in consumer spending. "Today's retail sales report shows the American consumer is alive and well, and continuing to be a pillar of support for the U.S. economy," said Navy Federal Credit Union Corporate Economist Alan MacEachin in a statement emailed to Retail Dive. "A solid jobs market is driving up household incomes and boosting spending power. This is one less obstacle, if there were any left to begin with, standing in the way of a Fed rate hike next month."

The results bode well for the holidays, despite lingering anxieties about the outcome of the U.S. election. However, the report doesn’t reflect the ongoing downward pressure on prices, wrote Neil Saunders, CEO of research agency and consulting firm Conlumino, in comments emailed to Retail Dive.

“Worryingly for retail, we do not see price competition easing as we go into the holiday period,” Saunders said. “Indeed, if anything it is likely to strengthen with Amazon pushing deals to drive sales and Wal-Mart renewing its focus on everyday low pricing. Ultimately this will help to drive some reasonable volume increases, but at the same time it will dilute growth rates and will result in some margin pressure for retailers.”

Election anxiety isn’t likely to be felt in the short term, which leaves expectations for holiday spending unchanged, according to an election report from Conlumino emailed to Retail Dive, but there are unknown impacts in the medium and longer term.

“Just like the vote itself, the country is divided on the impact a Trump presidency will have on the economy,” according to Conlumino. “The positive and negative sides virtually cancel each other out, although there is a slight bias in favor of those with less favorable views.”

For now, the U.S. consumer is doing well and is spending as a result, and the economy has brought in more lower- and middle-income earners into the fold. “Given the distractions of the election and a slightly more cautious consumer this is not a bad outcome, and one which clearly indicates the sound nature of the underlying economy,” Saunders said. That all makes the outlook for the holidays “reasonable,” he said, but falling “a long way short of being spectacular.”