Retail sales rise 0.2% in October; CPI up 2% year-over-year.
Retail sales rose by 0.2% in October, modestly exceeding economist expectations for essentially no change over the prior month. Excluding vehicle sales, sales edged higher by just 0.1%. Sales for September were revised higher to 1.9%.
Vehicle sales edged lower in October, which is not unusual. On a seasonally adjusted basis, however, auto sales have surged in the past two months, likely in part due to the need to replace vehicles destroyed in the hurricanes.
October is a bit of a “tweener” month for retailers, as the back-to-school shopping surge has ended, but the critical holiday shopping season hasn’t started to ramp up yet. While parts of the retail sector has been under pressure in recent years, the strength of the consumer sector should provide a degree of optimism, albeit probably cautious, for many retailers.
The combination of low unemployment, high consumer confidence, and some indications that tightening labor market conditions are starting to push wages higher at a faster pace should all be supportive of consumer spending. With Black Friday and the holiday season just around the corner, the combination of those factors should put consumers in a good mood at a good time for the nation’s retailers.
At the same time, inflation remains tame. The Consumer Price Index rose by just 0.1% in October, with the core index (excluding food and energy) rising by 0.2%. For the twelve months ended October 31, the headline index rose by 2.0%.
Tighter labor market conditions are expected to exert more upward pressure on prices, and that can already be seen in the service sector. Nonetheless, overall inflation remains well in check.
The bottom line is that the economy broadly appears to remain on a constructive growth path, and while the Fed continues to move down the path of tightening, there appears to be little in the near term likely to derail the expansion. It may not be the strongest of virtuous cycles, but for now, the story is still positive.
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