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Economic Watch: Retail Sales Surge, Up 4.3% Over Past Year

Retail sales in the U.S. jumped in October, according to Commerce Department figures released Tuesday, surpassing analysts’ expectations.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
November 15, 2016
Economic Watch: Retail Sales Surge, Up 4.3% Over Past Year

 

3 min to read


Retail sales in the U.S. jumped in October, according to Commerce Department figures released Tuesday, surpassing analysts’ expectations.

The 0.8% increase from the month before came as the department also upwardly revised September’s performance to show a 1% increase from August rather than the first reported 0.6% rise. This made for the largest two-month hike in at least the last two years, according to the Wall Street Journal.

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When October retail sales are compared to the same time in 2015 they are up 4.3%.

Last month’s gain was helped by an increase sales of building materials in the wake of Hurricane Matthew, along with higher auto and gasoline sales. Sales by non-store retailers, including online retail outlets, continued to pick up strongly and were nearly 13% above year-ago levels in October.

So called “core retail sales,” which exclude autos, building materials, gasoline and food services, also increased 0.8% in October from the month before, following an upwardly revised 0.3% September gain. The performance in both these “core sales” and overall retail sales beat consensus estimates from analysts with hikes of 0.6% and 0.4%, respectively.

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The solid increase in October retail sales, particularly the better-than-expected gain in “core sales” along with upward revisions to prior months, provides a strong start to the fourth quarter, according to RBC Economics. The October report supports RBC's forecast for consumer spending to pick up to 2.4% from the 2.1% annual pace recorded in the third quarter.

“With help from continued employment growth, rising wages and accommodative financial conditions, consumers have been the only consistent source of gross domestic product growth this year,” said Josh Nye, RBC economist. “We look for another solid contribution in the fourth quarter, although some reversal of the third quarter’s surge in exports and less add from inventories is expected to leave overall GDP growth at a slightly slower 2.3% annualized rate in Q4, following the previous quarter’s 2.9% gain that was the strongest in two years.” 

He said RBC’s forecast assumes consumer spending will continue to grow at a healthy clip in 2017, with potential upside risk if the incoming government follows through on plans to lower income taxes.

Despite the jump in retail sales, this doesn’t automatically mean retailers are going to be in a big rush to keep a high level of stock on their shelves – and that could spell caution for trucking companies.

In a separate report released Thursday, the Commerce Department said overall business inventories increased 0.1% in September, slower than the 0.2% gain in August. Also, retail inventories rose 0.2% in September, while wholesale inventories edged up just 0.1% as stockpiles held by manufacturers were unchanged.

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This put the total business inventory to sales ratio for September at 1.38 down slightly from both August and September 2015.

According to the Wall Street Journal, some large retailers are hoping to avoid late holiday season discounting on prices and are looking at keeping their inventories lighter than in the past. The downside for them is that could reduce their revenues and could lead to lower sales.

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