October retail sales are strong, reports Commerce and NRF

The United States Department of Commerce and the National Retail Federation (NRF) both reported that October retail sales turned in a solid performance.

Commerce reported that October retail sales saw a 0.8 percent increase over September at $465.9 billion and a 4.3 percent annual gain. Total sales for the August 2016 to October 2016 period were up 3.3 percent compared to the same period a year ago. Retail trade sales saw a 4.3 percent annual gain and were up 1.0 percent from September to October.  And nonstore retailers were up 12.9 percent annually.

The NRF reported that retail sales, excluding automobiles, gas stations, and restaurants, were up 0.9 percent from September to October, following a 0.2 increase from August to September and were up 2.2 percent annually.

“October’s strong sales and September’s upward revisions show that consumer spending improved despite the headwinds from the polarizing election and warmer than normal weather,” NRF Chief Economist Jack Kleinhenz wrote in a blog posting. “Recent solid wage gains and other fundamentals are generating uplift, positioning consumers and retailers for the healthy holiday season NRF is forecasting.”  

The three-month average of retail sales was up 3.5 percent on an annual basis, the NRF said, with all retail sectors it tracks turning in solid performances, with the exception of home furnishings and department stores.

As previously reported, the NRF is calling for holiday retail sales to head up 3.6 percent annually to $655.8 million, which marks a decent boost compared to the 10-year average of 2.5 percent and is also above the seven-year average of 3.4 percent, going back to the beginning of the economic recovery in 2009.

As expected, e-commerce is again expected to play a large role in holiday shopping, with the NRF saying it expects online sales to head up between 7 and 10 percent annually to as much as $117 billion, which is 10.3 percent higher than last year’s online holiday sales projection.

While the NRF’s holiday sales forecast is promising it is actually slightly off from 2015’s and 2014’s 3.7 percent and 4.1 percent forecasts, respectively.  The 2015 holiday shopping season ended up seeing a 3.0 percent annual increase.

The NRF’s holiday sales forecast, according to the organization, is based on an economic model that uses several different types of indicators, including consumer credit, disposable personal income, and previous monthly sales releases.

Stifel Fixed Incom Chief Economist Lindsey Piegza presented an optimistic view of the October retail sales in a research note.

“This morning's retail sales report was stronger than expected with gains in 11 of 13 categories,” she wrote. “Furthermore, with the largest back-to-back months of increased sales in nearly two years, the October sales report suggests positive momentum in consumer activity as we look out to the final weeks of the year. Ignoring moderate job gains and declining income growth, consumers were willing to loosen their purse strings and hit the malls last month extending purchases of everything from clothing to electronics to building materials. Perhaps the uncertainty of the presidential election wasn't such a dark cloud hanging over the American people?”