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Home > Consumer Products > U.S. retail sales grew at a healthy 0.3% in October

U.S. retail sales grew at a healthy 0.3% in October

Nov. 15, 2019 by Joseph Brusuelas

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The U.S. household continues to demonstrate strength through domestic retail sales, though at a decelerating pace. The October increase of 0.3 percent in top-line retail sales and the control estimate that feeds into the calculation of domestic gross domestic product reaffirm that the consumer remains on a solid footing heading into the critical holiday spending season.

The American consumer is still spending, though not as much…

As long as the American consumer continues to spend at a 2% to 2.5% seasonally adjusted annualized rate, and as long as trade tensions don’t worsen with China or expand to European autos, concerns about a recession can be temporarily put to rest. Under this scenario, the economy should continue to grow around its long-term trend of 1.8%. This data also tends to support the Federal Reserve’s policy of holding interest rates steady, which we expect to remain unchanged throughout 2020.

Given the substantial back revisions that are the norm in retail sales data, we prefer to use the three-month average annualized pace of spending to understand the true underlying trend. This data implies that spending peaked in May 2019 and has decelerated to a still strong 4.3% pace of spending, which the control data implies a 4% pace of household outlays. This supports our baseline call on the direction of spending and the economy.

A closer look at the data shows that spending on gasoline increased 1.1%, which indicates that investors and policymakers should anticipate a quarterly spending increase near 2.5%. The major drags on outlays in October were declines in spending on furniture, electronics, building materials, clothing, sporting goods and eating and drinking establishments. The major drivers of spending were the proxy for e-commerce, general merchandise, food and beverages.

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Filed Under: Consumer Products Tagged With: Joseph Brusuelas, retail sales

About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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