Growth in retail sales weak at 0.3%
NEW YORK — Retail sales in the U.S. grew a sluggish 0.3% in October, the slowest pace in six months, even as retailers offered early holiday discounts online and in stores, the Commerce Department reported Tuesday.
A surge in coronavirus infections nationwide and the expiration of a $600 weekly boost to unemployment checks over the summer has slowed spending by Americans and contributed to the slowest retail-sales growth since this spring, when the pandemic shuttered stores, theaters, restaurants and workplaces.
Excluding autos and gasoline, sales rose 0.2%, compared with estimates for a 0.6% gain.
Economists had expected overall sales to rise 0.5%, already a significant tail-off from September’s gain of 1.6%.
Federal Reserve Chairman Jerome Powell said Tuesday that the nationwide surge in confirmed coronavirus cases could slow the economy in the months ahead by discouraging consumers from spending.
“We’re seeing states begin to impose some activity restrictions,” Powell said in an online discussion with the Bay Area Council, a San Francisco business group. “The concern is that people will lose confidence in efforts to control the pandemic, and … we’re seeing signs of that already.”
Weaker momentum in consumer spending — which accounts for two-thirds of the economy — indicates growth
could slow more sharply after the third quarter’s record jump in gross domestic product. November and December could prove tougher with states and cities reimposing restrictions on indoor dining and nonessential business to contain a rampant coronavirus, while hopes for additional fiscal stimulus this year keep fading and political uncertainty hangs over government policy.
The data points “to a consumer sector that is becoming more cautious in its spending habits,” said Jim Baird, chief investment officer at Plante Moran, a financial advisory firm. “Weaker sales likely reflect several head winds: the slowing recovery, the recent surge in covid-19 cases across the country … and the reduction in fiscal support for sidelined workers.”
Powell also warned that even when the economy fully recovers, likely after a vaccine is distributed, some industries will likely remain weaker than they were before the pandemic. That could force many of those still unemployed to find work at a new company or in an entirely different industry. Those transitions also might require government support, he said.
“We’re not going back to the same economy, we’re going back to a different economy,” he said. “That’s going to mean that those people who worked in the service industry, they may need help and support for a time as they find work in new places.”
Most of October’s gain occurred in just a few areas that reveal how the pandemic has altered spending trends in America. Sales rose at homeand-garden stores, electronics and appliance stores, and online retailers. Those increases likely reflect ongoing home renovations and perhaps more computer purchases by those working from home and those families with children learning online.
Spending at restaurants and bars fell 0.1% in October, the first drop in six months, even before many new restrictions on indoor dining and curfews on bars were announced in recent days.
There is other evidence of growing consumer caution: Overall spending fell in early November, according to JPMorgan Chase, which anonymously tracks activity on 30 million of its debit and credit cards. The decline was somewhat worse in states with viral spikes, such as North Dakota and Iowa. Nationwide, spending fell to 7.4% below a year ago, JPMorgan said, a drop of about 2.5 percentage points from two weeks earlier.
The spending cutbacks could slow the economy in the final three months of the year, with some analysts forecasting growth of just 3% or 4% at an annual rate, down from a huge 33.1% snap-back in the July-September quarter.
Best Buy, Target and Walmart offered holiday deals in mid-October to piggyback on Amazon, which held its annual Prime Day sales event in the fall after it was postponed this summer because of the pandemic. Online shopping jumped 3.1% in October and has soared by nearly a third in the past year.
It was hoped that retailers would be able to entice Americans to get a jump-start on holiday shopping and avoid crowds.
Yet at clothing stores and sporting-goods shops, sales fell more than 4%. Department stores had a bigger drop, down nearly 5%.
At the same time, consumer finances are collectively healthy, with elevated savings and lower debt likely to continue supporting some spending.
The Commerce Department report covers only about a third of overall consumer spending. Services such as haircuts and hotel stays, which have been badly hurt by the pandemic, are not included.