Retail sales rose 0.3% in October, a sharp slowdown from the downwardly revised 1.6% pace of September and the slowest pace since April. Vehicle sales continued to rise despite a drop in overall unit sales for the month. Postpandemic sales of luxury vehicles, SUVs and pickup trucks have risen in response to city dwellers’ desire for safer modes of transportation than mass transit. Increased demand from building contractors and those who want to tow boats and RVs is boosting demand also. Retail sales excluding vehicles and parts rose a more tepid 0.2% after surging a revised 1.2% in September.
The control group for retail sales essentially flatlined for the month. This is what goes into the calculation of consumption for overall GDP. We are now looking for a contraction in retail sales for November. Consumers were already pulling back in response to surging COVID cases and the lapse in supplements to unemployment insurance in late October and early November. Millions of low-wage workers still sidelined by the pandemic are now running on fumes. Food insecurity is rising even as families try to lever rent moratoriums to buy groceries.
The largest gains during October showed up in online spending, at electronics stores and building material and garden stores. That reflects the shift to sheltering in place, the demand for remodeling we saw over the summer and new products from Apple. Apple is the only major retailer able to move the needle on sales with its new product introductions.
Big-box discounters offset weakness at traditional department stores. Reports of hoarding and the shift to online by many discounters enhanced those gains. The remaining major categories of spending contracted during the month, including spending at grocery stores. Liquor stores held up a bit better.
We still have to get through the darkest part of the winter surge in COVID infections before vaccines will be widely available. That is not likely until the summer of 2021. Dr Anthony Fauci has said that some doses for the general population may be available in a few months but the logistics are incredibly complex for the production and distribution of one dose, let alone the required two, for one of the current candidates.
Retail sales cooled when consumers decided to hunker down and stay home while infections surge. We expect to lose ground again in November and December. This is not the time for Congress to give up on aid for the U.S. economy and the growing ranks of hungry families.
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