Retail sales growth was softer in October, following a stronger-than-expected September report, which had sharp upward revisions, the Census Bureau reported on Friday.
The mixed results should not change the likelihood that the Federal Reserve will cut its policy rate in December. That probability has been around 60% since Federal Reserve Chairman Jerome Powell talked of not being in a hurry to reduce rates on Thursday.
Overall sales grew by 0.4%, while the control group, which feeds into the calculation of gross domestic product, fell by 0.1%. September’s numbers were revised up to 0.8% from 0.4%, and to 1.2% from 0.7%, respectively.
Sales of automobiles and parts were the main driver of overall sales in October, most likely driven by the spike in car sales during and after Hurricane Milton.
This gain is aligned with the significant increase in car prices, especially used cars, according to the consumer price index report for October released on Wednesday.
Still, in the same inflation report, commodity prices were unchanged, suggesting that the impact of inflation on the sales numbers should be muted on aggregate.
The softer sales figures, especially the control group, imply a slower start for goods spending in the final quarter. But that does not mean we should be worried about consumers heading into the holiday shopping season.
On a three-month annualized moving average, sales growth was unchanged at 5.3% in October, while the control group growth remained robust at 4.6%.
As long as wage growth exceeds inflation and goods prices stay under control, there are plenty of tailwinds for consumers to keep spending, not only this year but also early next year.
Read more of RSM’s insights on manufacturing, the economy and the middle market.
Beyond that time frame, things might get more complicated if higher tariffs on imported goods are introduced as promised. Higher tariffs would affect the prices of most goods included in the retail sales figures. A 10% or 20% increase in prices would push the dollar value of the sales numbers up, yet cause the sales volume would go down, which is much more important to growth.
Inside the data, motor vehicles and parts sales increased by 1.6%, electronics rose by 2.3%, and nonstore and online sales increased by 0.3%. Sales at restaurants and bars increased by 0.7%.
In contrast, furniture sales declined by 1.3%, health care and sporting goods fell by 1.1%. Sales at department stores as well as clothing sales also fell, by 0.2%.
Overall, eight out of 13 categories increased on the month, down from 11 in September.
