U.S. retail sales weak while inflation pressures remain subdued

If you were expecting today’s retail sales report for October to deliver a blowout gain in line with the surprisingly strong rise in payrolls for last month, today’s release on consumer spending is a disappointment.

Excluding the volatile costs of automobiles and gas, they forecast that so-called core retail sales rose 0.4% month-on-month. Receipts at building materials and garden equipment stores rose 0.9%, while sales at furniture stores increased 0.4%. Sales at online stores increased 1.4 percent.

Despite cheaper gas and interest free vehicle loans that stretch six years, auto sales in October posted a surprise decline, the Commerce Department said Friday – while retailers continued to post disappointing sales for the three months ended Oct. 31. The August 2015 to September 2015 percent change was revised from +0.1% to virtually unchanged. “Not an ideal recipe for holiday spending, but not likely to be a disaster either”.

Economists watch the retail sales report closely because it provides the first indication each month of the willingness of Americans to spend. Sales at gasoline stations saw the largest losses of any group, falling 0.9 percent on the month. The decline was surprising given that automakers reported strong sales for October.

Consumers spent less at electronics retailers, food and beverage stores and general merchandise stores.

Other measures have sent mixed signals about consumer spending.

United States consumers remained hesitant last month, spending more on their homes, health and restaurants but cutting back on big-ticket items like cars and appliances, the Commerce Department says.

The Dow Jones industrial average has fallen over 600 point, or 3.4 percent, over the last eight trading sessions.

Personal income, reflecting Americans’ pretax earnings from salaries and investments, climbed 0.1 per cent in September.

Sales at US retailers rose less than forecast in October as consumers pocketed the money saved after fueling up their cars. Jack Kleinhenz, chief economist for the National Retail Federation, said warm weather muted a few retailers’ sales numbers during the month, but we are still optimistic for solid holiday sales growth.

However, analysts largely said the two reports would not be enough to prevent the Federal Reserve from raising interest rates next month.