Retail Sales Rise in October as Consumer Spending Stays Strong
American consumers boosted their spending last month, signaling continued growth in the nation's economy, according to new data by the country's Commerce Department.
It reported that retail sales rose 0.4 percent from September to October, a solid but slightly slower pace compared to the 0.8 percent increase in the previous month.
While the overall rise was more moderate, a 1.6 percent surge in sales at auto dealerships played a major role in the gain.
Other sectors also saw notable increases: electronics and appliance stores posted a 2.3 percent jump, while restaurants and bars experienced a 0.7 percent boost in sales.
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Why has U.S. Consumer Spending Increased?
Though inflation contributed to some of the growth, the figures suggest a genuine increase in consumer demand.
Certain categories, however, showed signs of weakness.
Sales at furniture stores, clothing outlets, and drug stores were down, which economists partially attribute to the disruptions caused by last month's hurricanes.
On the other hand, sales at home and garden stores rose, potentially reflecting recovery and rebuilding efforts in the wake of the storms.
Tim Quinlan, an economist at Wells Fargo, said: "The moderation in price growth is allowing consumers to loosen their purse strings. People may not be thrilled with the cost of dining out, but their spending at bars and restaurants is growing faster than inflation."
The holiday shopping season begins in less than two weeks, with retailers anticipating strong but tempered demand.
Will the U.S. go into Recession?
The latest data points to a healthy economic backdrop heading into the final quarter of the year, after the economy expanded at a solid 2.8 percent annual rate in the third quarter.
Despite lingering concerns over high prices, which are still 20 percent higher than three years ago, consumer sentiment has improved.
The Conference Board's most recent consumer confidence index posted its biggest monthly gain since 2021, with fewer Americans anticipating a recession in the next year.
For 18 consecutive months, average take-home pay has outpaced the rate of rising prices, further supporting consumer spending.
However, inflation's lingering impact continues to be felt. Grocery store sales saw only a modest increase in October, suggesting that many households are still grappling with food prices that remain significantly elevated.
Lorraine Thompson, a shopper at Walmart in Secaucus, New Jersey, noted that everything from meat to cheese was more expensive than she remembered.
She said: "Everything is high. I've been buying less cheese and shopping more at Walmart because I think their prices are better than other places."
Will Consumer Spending go up During the Holiday Season?
The National Retail Federation (NRF) predicts that shoppers will increase their holiday spending by between 2.5 percent and 3.5 percent this year, slightly below the 3.9 percent jump seen in 2023.
Next week, analysts will scrutinize earnings reports from major retailers such as Walmart and Target to gauge how consumers are navigating the dual challenges of high prices and a still-evolving political and economic landscape.
Among the first major retailers to report third-quarter earnings was Home Depot, which continues to face a slowdown in customer spending.
However, the decline was less severe than anticipated, and the company's performance exceeded Wall Street's expectations.
Home Depot's CEO, Edward Decker, noted that while proposed tariffs on imports from Donald Trump 's administration could exert additional pressure, the company sources more than half its goods domestically and from other North American suppliers, which could mitigate some of the impact.
This contains additional reporting from The Associated Press.
