Retail sales rose 1.7% in October, the Census Bureau reported on Tuesday, in what could be an early read of the economy ahead of Thanksgiving and the Christmas holiday season.
The number compares to a revised 0.8% gain in September and forecasts for a gain of around 1.5% and comes amid rising consumer pessimism over surging inflation and continued shortages of goods.
Retail trade sales were up 1.9% for the month and 14.8% year over year, while gasoline sales spiked 46.8% from last year, driven by higher per-gallon prices.
Retail sales are a key component of the nation’s gross domestic product in an economy where consumer spending accounts for more than two-thirds. After a dip in the third quarter, analysts are looking for the economy to close strongly as the delta variant of the coronavirus fades.
Goldman Sachs recently updated its forecast, saying growth over the next few quarters would average a 4% annual rate as the service sector continues to reopen, consumers quench their pent-up demand and businesses continue to restock inventories.
Political Cartoons on the Economy
However, the Wall Street firm warned the economy will “contend with a large and steady headwind from diminishing fiscal support that we believe will ultimately leave GDP growth near potential by late 2022.”
A separate report from NPD, a retail industry observer, found general merchandise revenue grew 19% in the first week of November, with consumers focusing on post-pandemic categories like fashion and beauty supplies.
Unit sales rose 4% during the same period, suggesting higher prices played a role in the strong sales numbers.
“Consumers are clearly rushing to get some product before it’s gone, but that is not the sole source of this year’s early holiday shopping vigor,” Marshal Cohen, chief retail industry adviser for NPD, said in a statement.
“With supply chain complications and inflation concerns top of mind for consumers, many – if not most – used October as an extension to the holiday shopping season getting a head start before Halloween,” says Dave Cesaro, retail and consumer behavior expert at marketing data firm Vericast.
“In addition, I’m hearing from retailers that more shoppers are returning to stores,” Cesaro adds. “Retailers are using multiple communication vehicles such as email, social media and a resurgence of print circulars and catalogs to entice shoppers to shop early and save.”
Retailers moved ahead of schedule this year amid reports of shortages, with stores putting out Christmas merchandise by Halloween. But even that may not have been soon enough for some categories, while the notion of standing in line at midnight for Black Friday may not pan out the way it has in previous years.
Angelica Gianchandani, a practitioner in residence and brand marketing expert at the University of New Haven, says shoppers may need to change their expectations away from large-screen TVs and smartphones because of supply bottlenecks to experiences such as ski lift tickets, cooking lessons and the like.
“The whole concept of a Black Friday where you have the sprint to get there and camp out is irrelevant” this year, she says.
A pair of major retailers reported strong third-quarter earnings Tuesday, with Home Depot seeing sales rise 9.8% in the period and Walmart posting 4% sales growth with total revenue of $140.53 billion topping estimates of $153.6 billion.
In the U.S., Walmart said same-store sales grew by 9.2%, excluding fuel, above expectations.