Skip to Content

US retail sales fell in October for the first time in seven months

By Bryan Mena, CNN

Washington, DC (CNN) — Americans cut their retail spending in October for the first time since March, with interest rates at a 22-year high.

Retail sales, which are adjusted for seasonality but not inflation, fell 0.1% in October from the prior month, the Commerce Department reported Wednesday. While that’s the first monthly decline since March, it was a smaller decline than economists were expecting.

October’s decline in retail spending is potentially an early sign of a slowing economy as US consumers get squeezed by higher borrowing costs and they continue to rack up credit card debt.

A drop-off in sales of some big-ticket items helped drive October’s decline. Car sales fell 1.1% in October from September, while furniture sales declined 2% during the same period. Durable goods — or products meant to last at least three years — are often purchased using credit.

Americans still kept spending at a decent pace at restaurants and supermarkets, rising by 0.3% and 0.7% in October, respectively.

The Federal Reserve has raised interest rates 11 times since March 2022 in a bid to combat high inflation, which has slowed markedly from its four-decade peak last year.

After a summer of robust economic strength, Fed Chair Jerome Powell and other officials at the central bank have said the economy will need to cool further to ensure that inflation is on track to the 2% target.

Wednesday’s retail sales report bodes well for the Fed, since it shows spending isn’t reaccelerating or remaining stubbornly strong. The decline was also modest, so there isn’t yet any indication of severe economic weakness.

“The October retail sales report underscores our view that slowing income growth, depleted excess savings and restrictive credit conditions are constraining consumers’ willingness and ability to spend,” said Kathy Bostjancic, chief economist at Nationwide, in a note Wednesday.

“Along with the encouraging October CPI report and healthy slowing in employment growth, the pullback in consumer spending after the summer spending spree will give the Federal Reserve comfort that their restrictive monetary policy stance is reducing inflationary pressures,” she added.

A softer economy ahead

One month’s data doesn’t make a trend, but economists are widely expecting the US economy to cool further in the final months of the year, including inflation, under the weight of several economic headwinds.

The Consumer Price Index rose 3.2% in October from a year earlier, down from September’s annualized 3.7% rise, marking the weakest pace since March 2021, the Bureau of Labor Statistics reported Tuesday.

A separate report released Wednesday showed that inflation at the wholesale level cooled off in October, reversing a three-month trend that had seen the cost of energy push up supplier prices.

“Progress continues, though we still have a way to go” to get inflation back to its target, said Chicago Fed President Austan Goolsbee at an event hosted by the Detroit Economic Club on Tuesday.

In addition to crucial inflation data, Fed officials are also paying close attention to figures gauging economic growth, the job market and housing. That’s because the data helps paint a picture of some potential sources of inflation.

The US economy expanded at a scorching 4.9% annualized rate in the third quarter, largely driven by consumer spending. US employers added 150,000 jobs last month, after adding a solid 297,000 in September, reflecting the job market’s continued cooldown.

“With goods inflation already coming down and nonhousing services inflation typically slow to adjust, the key to further progress over the next few quarters will be what happens to housing inflation,” Goolsbee said.

The-CNN-Wire
™ & © 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

Article Topic Follows: CNN - Money

Jump to comments ↓

CNN Newsource

BE PART OF THE CONVERSATION

KION 46 is committed to providing a forum for civil and constructive conversation.

Please keep your comments respectful and relevant. You can review our Community Guidelines by clicking here

If you would like to share a story idea, please submit it here.

Skip to content