U.S. Retail Sales Insight for October

Retail sales in the U.S. remained nearly unchanged in October, which may not reflect the underlying consumer strength, especially as many Americans began their holiday shopping early, even before Halloween.

According to the Census Bureau, retail and food service sales reached $732.6 billion in October, virtually the same as September. However, this overall stagnation hides various trends; while traditional retail showed some unexpected resilience, there were notable weaknesses in automotive and home-related sectors.

Car sales saw a decline of 1.6% in October, although they were still 1.2% higher than last year.

Sales at building material and garden centers dropped by 0.9%, which is a significant 4.5% decrease compared to the previous year. On a brighter note, furniture and home goods stores experienced a 2.3% increase from the previous month, but saw a 3.0% dip year-over-year, likely linked to the recent decline in mortgage rates.

Gas station sales fell by 0.8%, primarily because of lowered fuel prices.

When we exclude the volatile car and gasoline sales, the underlying consumer demand becomes clearer. In fact, removing these categories indicated a 0.5% rise in sales, hinting that consumers are managing to keep their purchasing power intact even while cutting back on pricier items.

Unusually strong performance was noted in traditional retail sectors geared toward holiday shopping. Department stores, for example, saw a significant month-over-month rise of 4.9%, which was the highest in the report and quite encouraging for an industry that has faced ongoing challenges. Year-over-year, department store sales also climbed 4.6%. Sales in sporting goods, hobbies, musical instruments, and bookstores went up by 1.9% from September and increased 4.6% compared to October of the prior year.

Online retail continues to flourish, with non-store retailers recording a month-over-month growth of 1.8% and an annual increase of 9.0%.

This strong showing in discretionary spending indicates that consumers are entering the holiday season with confidence and may be making purchases earlier than usual, ahead of the typical rush in November and December. Meanwhile, food services and restaurants saw a slight decline of 0.4% month-over-month, though they still saw a 4.1% annual rise, further demonstrating consumers’ willingness to spend on non-essential items.

The weakness in housing-related categories likely reflects the ongoing effects of rising mortgage rates on home sales and the typical spending on renovations tied to homeownership transitions. Interestingly, October marked a time when mortgage rates were beginning to fall, sparking increased spending in furniture and home decor, suggesting a connection between these retail areas and housing market dynamics.

Year-over-year statistics showed positive trends overall, with total retail sales up 3.5% from October 2024, and a 4.2% increase for the three-month period from August to October.

Grocery store sales nudged up by 0.3% in October and surged 2.7% compared to the same month last year. Conversely, healthcare and personal care stores experienced a slight decline of 0.6% from last month, though they had a 5.7% increase year-over-year.

This report arrives as the Federal Reserve ponders whether the economy could benefit from further interest rate adjustments. It presents a mixed picture: while discretionary spending shows strength—indicating that the economy isn’t overheating—there’s evident weakness in interest rate-sensitive sectors, reflecting a monetary policy designed to keep demand in check.

Lastly, it’s worth noting that retail sales data is adjusted for seasonality but not for inflation.