Retail Sales Growth Rebounded in October While Initial Claims Ticked Up

Retail sales and food services jumped 0.8 percent in October following two small declines in August and September. Over the past year, they are up 4.6 percent, slightly ahead of the 4.2 percent 12-month change through September. Retail sales have been broadly trending higher since early 2016 (see chart). The solid gains are consistent with strong consumer fundamentals including a tight labor market, accelerating hourly earnings growth, and high consumer confidence.

Gains in retail sales in October were widespread among the components. The only major components to show declines for the month were furniture and home furnishings, down 0.3 percent in October but up 1.2 percent over the past year, and food service and drinking places (restaurants), down 0.2 percent for the month but up 6.2 percent for the past year — one of the strongest yearly gains among the components of retail sales.

The strongest yearly gain among the various components belongs to non-store retailers, primarily online stores. Those are up 12.1 percent from a year ago and have been growing at a faster pace than general retail sales for more than a decade (see chart). Among other categories with strong gains in October, motor vehicle and parts dealers saw a 1.1 percent increase for the month but are down 0.3 percent for the past year, building-materials and building-supplies stores gained 1.0 percent (3.6 percent for the year), electronics and appliance stores increased 0.7 percent (1.6 percent from a year ago), miscellaneous store retailers had a 0.6 percent rise (2.4 percent from a year ago), clothing stores increased by 0.5 percent for the month (4.7 percent for the year), sporting-goods, hobby, musical-instruments, and book stores also rose 0.5 percent but are down 8.5 percent from a year ago, and general-merchandise stores rose 0.5 percent in October (up 3.5 percent for the last 12 months).

Gasoline-station sales posted a 3.5 percent rise in the latest month, putting the 12-month gain at 16.2 percent, but this category tends to be driven by price changes (as opposed to sales volume) more than other categories. Average retail prices for gas increased 0.5 percent for the month and are up 17.7 percent over the past year.

Among retailers of consumer staples, food-store sales were up 0.3 percent for the month (and up 3.0 percent from a year ago) while health and personal-care stores were unchanged (but up 4.7 percent for the year).

Weekly data on initial claims for unemployment insurance show the labor market remains very tight. Claims ticked up slightly to 216,000, a rise of 2,000 from the prior week. The four-week average increased to 215,250 from 213,750 in the prior week. The four-week average has been below 300,000 since March 2015, the longest run since the 1970s. As a share of payroll employment, claims continue to hover at record lows.

Today’s data show the economy remains generally healthy, supported by a robust labor market and rebounding consumer spending. However, recent volatility in capital markets reflects growing uncertainty around U.S. economic policies as well as broadening risks in the global economy. Both have the potential to negatively impact the current economic expansion.

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Robert Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.