Retail Sales rose more than expected in October as consumers continue to spend, undeterred by rising prices.
Headline monthly sales advanced 1.7% compared to estimates for a 1.2% rise. This is a sharp increase in sales from September’s upwardly revised rise of 0.8%.
Excluding auto sales, monthly sales also rose 1.7%, outpacing economists’ estimates for a 0.9% rise. This follows a downwardly revised 0.7% rise in September.
Analyst Note
Before getting deeper into the report, it is important to recognize that, while spending was stronger than expected, retail sales are adjusted for seasonal factors and not price changes. This means that some amount of the growth is attributed to price increases and has nothing to do with a desire to spend that amount.
While the numbers in the report aren't adjusted for inflation, the analysts who, on average, expected a 1.2% increase did include the effects of price increases. so while the absolute month-over-month growth numbers include the effects of rising prices, the difference between the estimate and the actual number shows consumers spending more than expected even with price increases factored in.
Holiday Shopping
While the surge in consumer spending is welcome, an underlying caveat to the report could be that the holiday shopping season is simply starting earlier which could subdue spending growth in later months.
As noted this past week, 31% of consumers planned to begin holiday shopping before Halloween. Bank of America economist Michelle Meyer noted that companies began offering sales in October, in order to capitalize on the early holiday shopping season.
Winners
The categories with the highest monthly advance were: non-store retailers (4.0%), gasoline stations (3.9%), electronics & appliance stores (3.8%), building material & garden equipment & supplies dealers (2.8%), and miscellaneous store retailers (2.8%).
These categories, with the exception of gasoline stations, support the theory above that holiday spending is being pulled forward this year.
