- Retail sales rose by 0.3% m/m in October, below market expectations of 0.5%. September’s gain was revised down to +1.6%, from +1.9% in the advance estimate.
- Sales were strongest at building materials & garden equipment stores (+0.9% m/m), vehicles and parts (+0.4% m/m), and gasoline stations (+0.4% m/m).
- Sales at food services & drinking places, on the other hand, declined marginally (-0.1%), however, this was the only category revised up from +2.1% to +2.4% m/m in September.
- Excluding volatile categories, sales in the “control group” used in determining personal consumption expenditures, edged up by 0.1%. September’s gain was also revised down to +0.9% from +1.4% reported earlier. Within the group, most categories were in the red, with the notable exception of non-store retailers, which recorded an impressive 3.1% gain m/m.
Key Implications
- The good news is that retail sales continued to make gains in October, the bad news is the pace has slowed considerably. With cases surging and restrictive measures increasing, the recovery is likely to enter a much slower stage over the next few months. In November, more than a dozen of states and the District of Columbia extended restrictive measures, limiting gatherings, reducing capacity at restaurants, advising against traveling and urging citizens to remain at home.
- Even without renewed shutdowns, the coronavirus resurgence risks depressing spending. A pickup in growth will have to wait for a vaccine, which fortunately, looks to be made available earlier than previously expected in the first half of next year.
- There were some bright spots in this report such as the continued strength in online shopping. Reluctant to host in-person parties or go treat-or-treating, households escaped the frights of reality by shopping online for seasonal décor, costumes and candy. A jaw-dropping 29.1% increase in sales of non-store retailers points to consumers adapting to the pandemic – a trend that may very well prove to be permanent.
