Consumer spendings hangs on, as holiday season ramps up
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Illustration: Annelise Capossela/Axios
It's not the summer splurge that defined the last few months. Instead, October's retail sales data shows consumer spending might be landing in the sweet spot that could allow America to achieve a soft landing.
Why it matters: Consumers slowed spending last month, but by less than analysts expected — and alongside revisions that showed stronger late summer activity than previously thought.
- That suggests the consumer is still strong but may be backing off just enough to help inflationary pressures abate.
- This data comes before Black Friday and Cyber Monday sales.
What they're saying: "One month of flat retail sales isn't a red flag, particularly coming off three consecutive months of strong gains," wrote Jim Baird, CIO at Plante Moran Financial Advisors.
- "Sales are expected to grow in the coming months, but the holiday spending spree is expected to be more measured than in recent years."
By the numbers: Retail sales fell 0.1% last month, but that came after blockbuster reports that were even better than previously estimated.
- The revised data, which is not adjusted for inflation, shows retail sales jumped nearly 0.9% in September alone, not the 0.7% earlier estimated.
Details: Consumers reined in spending in most of the retail categories tracked by the government, including furnishing stores (-2%), department stores (-1%) and auto shops (-1%). They spent more at health stores (+1%) and electronics and appliance shops (+0.6%).
- Excluding sales at auto shops and gasoline stations, retail sales were up slightly (+0.1%) from September.
What to watch: The moderation in retail sales shows that consumer spending is "throttling back," which could lead to slower economic growth than last quarter's rapid growth rate, Nationwide chief economist Kathy Bostjancic wrote in a note.
The big picture: The U.S. consumer has been a bright spot for the economy — consistently defying expectations of a spending slowdown in the face of higher interest rates, steep inflation and the resumption of student loan payments.
- The government data shows those factors haven't crushed sales at retail stores — at least, not yet. A strong labor market has helped underpin the resilient U.S. consumer. Zooming out, retail sales are up about 2% from the same period a year ago.
The bottom line: A fuller picture of consumer spending in October, which includes spending on services, will be released later this month.
- A slew of factors could crimp consumer spending into the holiday season. As of now, however, the consumer is still hanging on.
