Retail sales rose 1.3% in October, driven by increased purchases of gasoline, food and drink, the Census Bureau reported on Wednesday.
Economists had forecast a gain of 1% or so following September’s unchanged reading. Retail sales are not adjusted for inflation.
Spending on gasoline rose 17.8% from a year earlier, while sales at food and drinking establishments increased by 14.1% from 2021.
“October’s 1.3% retail sales growth reflects the rebound in consumer spending after flat sales in September,” said Claire Tassin, retail & e-commerce analyst at decision intelligence company Morning Consult. “Online retail, up 1.2%, continues to perform alongside home furnishings and DIY stores, up 1.1% each. This shift tracks with a slight downward trend in the share of consumers concerned about inflation across key categories.”
The report was anticipated ahead of what could be a critical holiday shopping season for many businesses beset by higher costs and consumers dealing with increased borrowing charges.
On Tuesday, Walmart said it expects holiday spending at its stores to increase 3% over last year but noted it had resorted to early sales to move inventory ahead of the season.
It also reported “softness in discretionary categories including electronics, home, and apparel.”
Competitor Target, meanwhile, on Wednesday announced a 50% drop in profits during its most recent quarter, as it cleared out inventory built up during the pandemic and witnessed a sharp slowdown in sales.
It forecast a weak holiday season, with a low single-digit decline in overall sales for the period.
“As we look ahead, we expect the challenging environment to linger beyond the holiday season and into 2023,” Chief Financial Officer Michael Fiddelke said on a call with reporters.
A mixed holiday season could well be on tap for many businesses, as the Federal Reserve continues its campaign of raising interest rates to a “restrictive” level to choke off inflation. Recent reports have suggested that it is working, with both consumer and wholesale inflation for October showing some moderation.
A survey of 550 small businesses by American Express’ Kabbage released Tuesday found that nearly a quarter of them, 24%, expect the upcoming holiday season to be make or break for them.
“Small businesses understand the criticality of successfully navigating this time of year,” said Brett Sussman, vice president head of sales & marketing at Kabbage. “As we approach this holiday season, they’re making the necessary preparations and adjustments to win the holidays.”
Retail experts say that while spending is holding up, there has been a shift away from large goods to services and experiences.
“Our data shows year-to-year spending is up 5.8% which tells us that while we are seeing a slowdown in spend because of consumer headwinds, the economy is recovering, albeit not as quickly as most would like,” said Jonathan Silver, CEO of Affinity Solutions, which tracks credit and debit card transactions from retailers. “The positive is that inflation was less significant in October than originally anticipated.”
“What stood out in our data is spending on electronics is down 2% which has been the prevailing trend throughout the year because of supply chain issues and inflation, so this may be a less than positive harbinger for the impending holiday season,” Silver added.
Consumers will be looking for “deep discounts and additional savings during traditionally heavily promoted time periods like Black Friday weekend, and Cyber Monday,” said Chip West, director of category strategy, national sales at Vericast, an online marketing firm.
“Savvy retailers know that this holiday shopping season will be elongated, and any positivity seen in October to kick it off should bode well for the remaining months of 2023,” West added