The increase in the cost of energy and housing value declines in metro areas are having an impact on consumer spending as the holiday season is set to begin, according to economic data released Wednesday.
Retail industry sales for October (which exclude automobiles, gas stations, and restaurants) rose 4.4 percent unadjusted over last year and 0.1 percent seasonally adjusted from September, according to National Retail Federation data.
Meanwhile, October retail sales released by the U.S. Commerce Department show total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) increased 0.2 percent seasonally adjusted from last month and 6.7 percent unadjusted, year-over-year.
“Gas prices and other economic issues are beginning to have an effect on consumer spending,” said NRF chief economist Rosalind Wells. “While spending did increase in many important areas such as apparel and electronics, the consumer is showing caution while spending.”
Global Insight—which provides economic and financial analysis, forecasting, and market intelligence—was even dourer with its analysis of the data, saying retail sales have slowed “to a crawl.”
“Top level retail sales advanced by 0.2% in October, but sales excluding gasoline, and the core measure of retail sales that factors into real consumption spending was essentially flat,” Brian Bethune, Global Insight U.S. Economist said. “In addition, downward revisions to the third quarter now indicate that consumption spending advanced by 2.6 percent in the third quarter, a substantial drop from the preliminary estimate of 3 percent.”
NRF reports that an unseasonably warm October led to many leftover fall and winter apparel items at retail stores. Sales at clothing and clothing accessory stores increased a meek 0.1 percent seasonally adjusted from September but rose 4.9 percent unadjusted year-over-year.
Halloween sales may have helped health and personal care stores as many now sell related costumes and accessories; sales increased 0.2 percent seasonally adjusted month-to-month and a solid 5.9 percent unadjusted from last October in those stores, according to NRF.
Building material and garden equipment stores sales showed slight increases in October, growing 0.6 percent seasonally adjusted month-to-month and 3.9 unadjusted year-over-year, NRF said. However, furniture and home furnishing stores sales suffered with a 0.9 percent decrease seasonally adjusted from September and 0.5 percent drop unadjusted from last October.
Global Insight said the drop in house and home products sales along with other declines in sports equipment and general merchandise are attributed to the decline in housing values
“Global Insight projects that real consumer spending will expand by a very subdued rate of 1.4 percent in the fourth quarter, while overall real GDP growth will chin the bar at just over 1 percent,” Bethune said. “While this suggests a tough quarter for retailers, the ‘silver lining’ to the slowdown in consumption spending is a reduction in the rate of growth of imports, a prospective rise in the savings rate, and downward pressure on core inflation. This should alleviate the ‘inflation risks’ that were recently flagged by the Federal Reserve.”