Retail sales in the United States fell for the first time in 7 months

Retail sales in the United States fell for the first time in 7 months

Written by Jeffrey Bartash

Consumer spending may slow during the holiday shopping season

The numbers: Sales at retailers nationwide fell 0.1% in October and fell for the first time in seven months, but the decline is unlikely to continue as the U.S. enters the holiday shopping season.

Economists polled by the Wall Street Journal had expected sales to decline by 0.2%. The government stated that this is the first negative reading since March.

Retail sales account for about a third of total consumer spending and usually provide evidence of the economy’s strength.

Economists expect that sales during the holiday shopping season will likely decline after big gains in the past few years, but they still expect a strong increase of 4% or so.

Key Details: Car dealers recorded a 1% drop in sales dragging down key retail numbers. Car sales represent about 20% of total retail sales.

Receipts at gas stations also declined due to lower gas prices and lower demand for fuel following the end of the summer driving season.

Retail sales rose a meager 0.1% after excluding auto dealers and gas stations, giving a better idea of ​​consumer demand.

Sales at online retailers, bars and restaurants rose slightly in October, suggesting that consumers still have discretionary income to spend on wants rather than needs.

Taking a bit of the impact from October’s retail report, sales in September were also revised to show an increase of 0.9% instead of 0.7%.

The big picture: Consumer spending is certain to slow after one of the largest third-quarter increases in a decade.

High borrowing costs and still troublesome inflation are putting pressure on household budgets. The latest forecasts indicate that the holiday shopping season could become the weakest in five years.

However, rising wages and falling unemployment to its lowest levels in decades could continue to fuel consumer spending and keep the United States out of recession. Household expenditures drive about 70% of the US economy.

Looking ahead: “Following the significant increase last month, the consumer has now returned to a more manageable level of spending, cutting back on spending ahead of the important holiday season,” said Damian McIntyre, portfolio manager and head of multi-asset solutions at Federated Hermes.

“Overall, consumers are still spending,” Target CEO Brian Cornell said on a conference call Wednesday.

Market Reaction: The Dow Jones Industrial Average (DJIA) and S&P 500 SPX are set to open higher in Wednesday trading.

Stocks rose on Tuesday after a low inflation reading gave hope that the Federal Reserve was done raising interest rates. Another weak report on wholesale inflation added to the optimism.

-Jeffrey Bartash

This content was created by MarketWatch, operated by Dow Jones & Co. MarketWatch is published independently of Dow Jones Newswires and The Wall Street Journal.

 

(End) Dow Jones News Agency

15-23-11 0910ET

Copyright (c) 2023 Dow Jones & Company, Inc.

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