According to the Commerce Department, total retail sales were up 0.5% compared to September, hitting $397.7 billion in sales. The increase, which was on top of a surprisingly strong 1.1% increase in September, beat economists’ expectation for a 0.3% increase. October sales were 7.2% higher than October a year ago.
Since consumer spending accounts for more than two-thirds of U.S. economy, economists closely study the figures to gauge consumers’ spending patterns. October sales got a boost, too, as gasoline prices fell perhaps freeing up dollars for other spending. Auto sales edged up, too.
But Apparel, Accessories Sales Falter
Excluding autos, retail sales rose 0.6%, the largest increase in seven months, after advancing 0.5% in September. Core retail sales, which exclude autos, gasoline and building materials, rose 0.7% on top of a 0.5% increase posted in September.
Core sales include most consumer goods sold at retail and more closely correspond with the consumer spending component of the nation’s gross domestic product report, economist say.
All but two of the 13 categories tracked in the monthly report posted increases. Apparel and accessories sales dropped 0.7%, the largest decline since December 2010. Furniture and home furnishings sales which were also down -0.7%. (However, compared to October 2010, apparel and accessories sales are still up 5.8%).
Sales of electronics and appliances soared 3.7% helped by Apple’s latest iPhone, building material retailers increased 1.5%. At general merchandise stores, which include major mass merchants, sales were flat. The department store channel was down 1.2%.
In another positive report today, the Bureau of Labor Statistics reported that wholesale prices “declined 0.3% in October” from September due largely to a 1.4% drop in energy costs and a turnaround from a 5.9% increase over the last year.
Commenting on today’s results, Paul Dales, senior U.S. economist for Capital Economic said: “All the recent evidence suggests that fourth-quarter GDP growth will be as good as in the third quarter, if not better. Overall, the economy appears to be growing at a decent clip. We are not convinced that this will be carried into 2012, however.”
Economists are still concerned about low consumer confidence levels, which last month fell to lows like those during the “depths of the Great Recession” in late 2008/early 2009.
Yet despite their apparent concern about the future, consumers continue to spend, perhaps lured in by increasing promotions, pre-Black Friday doorbusters and other incentives.
‘Consumers Resistant to Bad News’?
“The consumer has to come through this holiday season if we are going to get back to more decent growth rates and the early readings are those households have hit the stores quite strongly,” said Joel Naroff, chief economist at Naroff Economic Advisors.
“After four years of economic uncertainty, consumers have grown resistant to bad news,” said Sandy Kennedy, president, Retail Industry Leaders Association (RILA) “Increased consumer activity in October in the face of continued economic headwinds bodes well for the upcoming holiday shopping season and for a consumer lead recovery.”
“As the holiday shopping season begins in earnest this month, look for retailers to build on the lessons of the past few years and attract shoppers to their stores with attractive product assortments and great deals,” added Kennedy.