October Retail Sales

Retail sales rebounded 0.3 percent in October after falling by the same percentage in September according to the Census Bureau.  Year-over-year, this indicator has improved 4.1 percent.   Widespread gains within the indicator suggest the economy is still expanding.

Spending on food services and drinking places moved higher once again.  This is the epitome of discretionary spending.  Americans can easily substitute away from this category by cooking and entertaining at home, but receipts at restaurants and bars grew faster than those for food and beverage stores.  Restaurants’ relative improvement suggests consumers feel comfortable enough with their current situation and have lofty enough expectations for the near term future to spend more money eating away from home.

Only three categories (gasoline stations, electronics, and general merchandise) declined in the period.  Falling energy prices are to blame for the downtick at the pumps, not exactly a bad thing.  Electronics experienced a bump in September because of the latest iPhone release, so October’s downtick is not alarming. General merchandise was unchanged in the period, but its department store subcategory fell.  Brick and mortar companies may be losing ground to their non-store rivals who gained in the period.

As the year winds down and holiday spending shifts into gear, falling gasoline prices and an improving labor market should combine to bolster non-fuel components within this indicator.  Because retail sales represent roughly one-fifth of the economy, they are regarded as a bellwether for the nation’s output.  From the looks of it, the fourth quarter of 2014 is off to a good start.      (by C. Cox)