Retail sales grew in October after strong and upwardly revised gains in September. Gains were broad based in October as only three categories recorded month-over-month declines. One category that fell was sales at building materials stores (-1.2% month-over-month), and that same category gained 3.0% the prior month on hurricane boosted sales. In addition, the 1.2% decline in October in gasoline station sales can be seen as a positive for other categories of consumer spending.
As a result of the improved sales gains in recent months, year-over-year headline retail sales were up 4.6% year-over-year as of October.
Core retail sales grew 0.3% in October and were up 3.4% year-over-year. Core retail sales benefitted from gains in clothing stores (+0.8% month-over-month), health & personal products stores (+0.8%), and grocery stores (+0.6%). In fact, the 3.2% year-over-year gain in grocery store sales as of October was the 2nd best annual reading since March 2015. Similarly, the trend in department store sales has improved. Sales at department stores as of October increased 0.8% compared to the same month a year ago. This is still subdued growth, but the October reading marked the first period of year-over-year growth for this category since the first quarter of 2015.
With September’s revision and the healthy October growth, core retail sales were up 3.4% year-over-year, which is at the high end of the 2.1% to 3.8% range year-over-year gains recorded over the last year. We continue to expect the U.S. consumer to be a key contributor to modest GDP growth in the U.S.