Retail sales rose 0.2 percent in October after rising 1.9 percent in September. Excluding categories impacted by weather events, retail sales remained quite strong which bodes well for Q4 personal consumption.
Retail Sales Ease in October as Hurricane Swell Recedes
Retail and food services sales rose 0.2 percent in October and September’s surge was revised higher to 1.9 percent. This was stronger than expected, as consensus had penciled in a flat month of sales as the boost from gas prices, building supplies and auto sales associated with the hurricanes eased from September. Control group sales – which exclude autos, food, gasoline and building materials were less impacted by the hurricanes in September, and were up a stronger 0.3 percent in October. Control group sales are up a solid 3.5 percent average annualized rate over the past three months, which suggests spending has solid momentum going into the last quarter of 2017.
The higher gasoline prices caused by Hurricane Harvey’s aim at the Gulf Coast faded in October, and gasoline station sales declined 1.2 percent on the month after surging 6.4 percent in September. Building materials sales also declined in October as payback for the outsized 3 percent rise the previous month, when immediate repairs and storm-proofing pushed up sales at home improvement stores. Notably, those were the only significant declines in October. The volatile nonstore retailer category fell 0.3 percent on the month but remains one of the strongest categories over the year.
Auto dealers’ sales continued to increase in October, rising 0.8 percent after September’s 4.6 percent surge. Vehicle replacement following the hurricanes have certainly provided a boost to the category, which saw sales rise 4.5 percent over the year on a three month average basis. Furniture stores may have also seen a boost from replacing storm damages, as sales rose 0.7 percent in October and are up 4.2 percent during the past three months relative to the same period last year. Continued inroads made in the housing market likely also helped with that year-over-year gain.
Sales at eating and drinking places ramped up 0.8 percent in October which was its largest monthly gain since January. Electronics and appliance stores also saw sales rise 0.7 percent in October but remain down over the year. Sales jumped 1.5 percent in the sporting goods and hobby store category in October – its first meaningful monthly increase this year, sales are down 2.4 percent over the year, however.
Control Group Sales Show Demand Strong for Q4
Retail sales were up for most categories in October, which is reassuring as a gauge of consumer spending momentum in the start of Q4. Control group sales, which go into the calculation of personal consumption expenditures in GDP, were up more than the headline in October because they were not adversely impacted by the comedown in gasoline prices. They also strip out volatile spending on food, auto and home improvement stores, and are thus a good gauge of underlying consumption demand. Control group sales saw momentum increase in October, which is good news for retailers going into the holiday season and for Q4 GDP calculations if this strength holds up.
