Retail Sales Climb Less Than Expected

The headline edged above expectations but the details of the October retail sales report aren't pointing to much momentum going into the holiday shopping season. Total sales did rise 0.3 percent in the month but ex-auto sales, which were thought to prove stronger, proved a little less solid than the headline at a 0.2 percent gain. Control group sales, which are GDP inputs, posted a solid 0.3 percent gain which, however, was a tenth below Econoday's consensus.

First the positives which are led by motor vehicles where sales, despite weakness in unit auto sales posted earlier in the month, rose 0.5 percent in October. Sales at gasoline stations, which are typically skewed by monthly price swings, jumped 1.1 percent. When excluding both autos and gas, retail sales managed only a 0.1 percent rise to fall below Econoday's consensus range.

Sales at clothing stores, reflecting weak prices, fell 1.0 percent with sales at furniture stores nearly as weak with a 0.9 percent drop. Sporting goods sales fell 0.8 percent in the month with electronics & appliances down 0.4 percent. A telling confirmation of weakness is a 0.3 percent in restaurant sales, one that doesn't speak to much consumer enthusiasm.

A plus in the report, as it usually is, are sales at nonstore retailers which rose 0.9 percent in what is a solid indication for e-commerce holiday sales. The retail sector is of course going through an e-commerce driven restructuring as confirmed by payrolls in the sector which have fallen sharply this year. Actual retail sales have been growing this year though October's nominal 3.1 percent rise from October last year is no more than moderate at best.

For the Federal Reserve, consumer spending is the economy's bulwark but one or two of reports like this, especially during the holidays, could raise talk that global-related weakness in manufacturing is spilling into the general economy, talk that would point to a resumption of rate cuts.