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U.S. retail sales stagnated in October as consumers tempered their spending amid economic uncertainties, following a summer spending surge that had boosted the economy.
The Commerce Department reported Tuesday that sales at U.S. retailers and restaurants remained unchanged from September to October, falling short of economists’ expectations. The flat performance came after modest increases of 0.1% in September and stronger gains of 0.6% in both July and August.
A significant factor in October’s flat reading was a 1.6% decline in motor vehicle and auto parts sales, largely attributed to the expiration of federal subsidies for electric vehicles. When excluding this automotive category, retail sales actually rose by 0.4%, suggesting underlying consumer resilience in other sectors.
“The retail sales report for October was a dud, but the underlying details offer more encouraging signals for consumer spending and an elevated starting point for the critical two-month stretch for holiday sales,” noted Tim Quinlan, economist at Wells Fargo. However, he cautioned that other indicators point to a potential slowdown through mid-December, creating uncertainty about consumer spending through year-end.
The report, which covers approximately one-third of overall consumer spending, revealed mixed performance across retail sectors. Clothing and accessories stores saw a 0.9% increase, while furniture and home furnishing businesses experienced a more substantial 2.3% rise—likely influenced by price increases resulting from tariffs on Chinese imports, which dominate the furniture market.
Online retailers continued their growth trajectory with a 1.8% sales increase, and department stores performed notably well with a 4.9% jump. However, restaurants—often considered a barometer of discretionary spending and the only service component in the retail report—posted a 0.4% decline, suggesting consumers may be cutting back on dining out.
The Commerce Department’s release was delayed more than a month due to the 43-day government shutdown, as federal agencies gradually catch up on postponed economic reports.
Adding to economic concerns, the Labor Department’s latest employment report revealed a mixed picture, with the U.S. gaining 64,000 jobs in November but losing 105,000 positions in October, partly due to federal workforce reductions under the Trump administration. The unemployment rate increased to 4.6%, its highest level since 2021, potentially threatening consumer spending capacity heading into 2025.
Despite these headwinds, the holiday shopping season began on solid footing, with Black Friday weekend showing strong deal-seeking consumer behavior. However, third-quarter retail earnings reports have highlighted divergent fortunes among major retailers.
Walmart, America’s largest retailer, posted robust sales by attracting shoppers across income levels with its value pricing. Similarly, TJX Companies—parent of T.J. Maxx and Marshalls—has benefited from consumers seeking discount treasure-hunting experiences. Conversely, Home Depot has witnessed customers scaling back to smaller home projects, while Target struggles to revitalize its reputation for affordable style.
The National Retail Federation maintains its forecast of 3.7% to 4.2% sales growth for November and December compared to 2023, when holiday sales reached $976 billion, representing a 4.3% year-over-year increase.
Consumer spending patterns continue to reflect the K-shaped economic recovery, with higher-income households thriving while lower-income groups struggle. Bank of America Institute’s analysis of its customers’ spending revealed that high-income shoppers increased their November spending by 2.6% year-over-year, while lower-income consumers managed just a 0.6% gain.
“Near-full employment has continued to support broad-based consumer demand,” wrote Claire Li, vice president of credit strategy at Moody’s Ratings, in a recent report. “But slowing hiring, cooling wage gains, and mounting affordability pressures are eroding households’ consumption growth.”
As retailers extend hours and intensify promotions for the final pre-Christmas shopping push, this divided spending pattern may determine whether holiday sales meet expectations in what has become an increasingly uncertain economic landscape.
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20 Comments
The expiration of EV subsidies likely played a big role in the auto sales decline. With the shift towards electrification, this trend bears watching. Overall, the retail data paints a picture of a cautious but still resilient consumer.
Absolutely, the transition to EVs is a major dynamic impacting the auto industry. The ebb and flow of government incentives can create volatility, but the broader shift seems irreversible.
The decline in auto sales is concerning, but the resilience in other sectors is encouraging. The retail industry will need to closely monitor consumer sentiment and spending patterns in the coming months.
Agreed. The auto industry’s challenges, combined with broader economic uncertainties, create a complex environment for retailers. Adaptability and diversification will be key to weathering any potential slowdown.
The mixed signals in the retail data highlight the complex and dynamic nature of the consumer landscape. Retailers will need to closely monitor a range of factors, from auto sales to broader economic trends, to inform their strategies.
Well said. Retail is a nuanced industry, and a holistic understanding of the various forces at play will be essential for businesses to navigate the challenges and opportunities ahead.
Curious to see how the holiday season sales will fare given the mixed economic signals. Retailers will need to navigate inflationary pressures and consumer uncertainty. A lot rides on the next couple of months.
Well said. The holiday season is a crucial period for the retail sector. Navigating the current economic climate will require agility and strategic planning from retailers.
The expiration of EV subsidies is an interesting factor behind the decline in auto sales. This speaks to the broader policy shifts impacting various sectors. It will be important to monitor how these changes ripple through the economy.
Absolutely. Government policies can have significant impacts on consumer behavior and industry dynamics. Tracking these regulatory changes and their implications will be crucial for businesses and investors.
The flat retail sales figure is a bit disappointing, but the underlying details suggest there may be more resilience in consumer spending than the headline number indicates. It will be fascinating to see how the holiday season plays out.
Agreed. The retail industry is a complex and dynamic space, and the holiday season will be a crucial test of consumer sentiment and spending patterns. Retailers will need to navigate these waters carefully to capitalize on any opportunities that arise.
This report highlights the nuanced and shifting dynamics in the retail landscape. While the overall sales figure was flat, the underlying trends suggest pockets of strength and weakness. Retailers will need to stay nimble to respond to evolving consumer behaviors.
Well observed. The retail industry is constantly evolving, and staying attuned to changing consumer preferences and economic conditions is crucial for success. Flexibility and innovation will be vital in the months ahead.
While the overall retail sales figure was flat, the underlying details suggest some resilience in consumer spending. The holiday season will be a critical test for retailers as they navigate economic uncertainties.
Agreed. The holiday season is a make-or-break period for many retailers. Their ability to adapt to shifting consumer preferences and economic conditions will be crucial in determining their success.
The expiration of EV subsidies is an interesting wrinkle in the retail data. This underscores the need for retailers to stay informed about policy changes and their potential impact on consumer behavior and industry dynamics.
Absolutely. Policy shifts can have far-reaching consequences, and retailers need to be proactive in monitoring and adapting to these changes. Agility and foresight will be key to success in the current environment.
The flat retail sales in October are a mixed bag. The decline in auto sales suggests some caution, but the increase in other sectors indicates underlying consumer resilience. It will be interesting to see how consumer spending shapes up for the holiday season.
Agreed, the holiday season is a critical stretch for retailers. The economic uncertainties are creating some volatility in the data, but it’s good to see pockets of consumer strength.