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Retail Sales Seen Posting Sixth Consecutive Monthly Gain in October

Amid pandemic conditions, U.S. consumers are doing more shopping.
(Stokkete)
(Stokkete)
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“U.S. shoppers likely boosted their buying in October for the sixth month in a row, as retailers pushed an early start to the holiday shopping season with heavy promotions,” WSJ writes.

Survey Says: Retail sales increased by a seasonally adjusted 0.5% in October from a month earlier, according to economists surveyed by WSJ. It’s not the 1.9% gain from September, but still, a substantial improvement historically speaking.

Retail sales have roared back from steep drops in March and April thanks to consumers buying “new cars and home fitness equipment while cutting back on in-person services that involve proximity to other people, like movie theaters, manicures and air travel.”

Overall, the situation looks to be improving. Last week showed declining jobless claims, rising employment and increased manufacturing and service activity in October. Economists revised their estimates on U.S. gross domestic product from a 3.6% contraction to 2.7% instead.

Other Key Numbers:

  1. “The personal-saving rate, the portion of after-tax income that consumers don’t spend,” nearly doubled from 7.3% in September 2019 to 14.3% a year later.
  2. JPMorgan Chase & Co. said last week its “its tracker of 30 million credit and debit cardholders recorded a 7.4% decline in spending from a year earlier in the week through Nov. 9, the weakest reading since early September.”

But all these factors remain on thin ice, as the precipitous rise in Covid-19 cases threatens to knock back recovery. Though the U.S. has rebounded faster than expected, Fed Chairman Jerome Powell said it has slowed “quite a bit” over the last few months.

Justin Oh:

In general, I believe consumer spending  is recovering well given how much the American economy has opened up, but fresh and widespread lockdowns would be detrimental to the spending recovery.

But if additional stimulus is passed in the next month and multiple vaccines are ready to be distributed by Q1 2020, I don’t see why the stock market wouldn’t look past the pandemic and onto a snap back in growth. I also imagine that if the job market recovers in 2021, the increased personal savings would represent spending “dry powder” that could boost spending into 2022.

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