U.S. retail sales in October increased by 0.4% month-on-month, slightly exceeding expectations, with the previous value significantly revised upward and a surge in automobile purchases

U.S. retail sales remained robust at the beginning of the fourth quarter. Driven by a surge in automobile purchases, U.S. retail sales in October increased, with other categories indicating some momentum as the holiday season approaches.

On Friday, November 15, the U.S. Department of Commerce released data showing that the month-on-month growth rate of U.S. retail sales in October, not adjusted for inflation, was 0.4%, compared to an expectation of 0.3%. The previous value for September was significantly revised up from 0.4% to 0.8%, although the August data was revised down to a decline of 0.1%.

Retail sales excluding automobiles grew by 0.1% month-on-month in October, below the expected 0.3%, with the previous value at 0.5%. Retail sales excluding automobiles and gasoline increased by 0.1% month-on-month in October, while the market expected 0.3%, and the previous value was 0.7%.

Among the 13 categories reported, 8 showed growth, with electronics and appliance stores leading the way. Automobile sales recorded the strongest growth in three months. E-commerce growth was relatively moderate, possibly reflecting discounts during Amazon's Prime Day and similar promotional activities by Walmart and Target.

The so-called control group sales (the spending on goods used by the U.S. government to calculate the country's GDP) fell by 0.1% in October, a significant decline following the largest increase since early 2023. This indicator excludes food services, automobile dealers, building material stores, and gas stations. However, over the past three months, the annualized growth rate of control group sales was 4.6%, indicating a good start for the U.S. economy at the end of the year.

Retail data is not adjusted for price changes and largely reflects only goods purchases, which represent a relatively small share of overall consumer spending. Data later this month will provide more details on inflation-adjusted spending on goods and services for October. Dining and bar consumption was the only service category in the retail report, growing by 0.7% in October.

Media analysis pointed out that the October retail sales data was mixed:

The significant upward revision of the previous value indicates that consumers are in a stronger position than previously thought as they enter the last few months of the year, potentially signaling a robust holiday shopping season.

However, inflation remains stubborn, and some retailers are already considering raising prices in response to the anticipated higher tariffs on imported goods under President Trump's administration. This could distort future retail sales data, as the related data is not adjusted for inflation, meaning that growth may merely reflect rising prices rather than an increase in sales activity.

The current outlook for U.S. retailers is challenging, as consumers remain financially strained after years of high prices. Current institutional forecasts suggest that U.S. consumers will reduce spending during this year's holiday season compared to last year. Additionally, the calendar effect of fewer shopping days between Thanksgiving and Christmas this year is expected to negatively impact sales Economists will closely monitor the sales performance of Black Friday and Cyber Monday to gauge consumer interest in holiday shopping. The earnings reports from Walmart and Target next week will also help to outlook the prospects.

Overall, the latest retail sales data, combined with this week's higher-than-expected CPI and PPI inflation data, may lead the Federal Reserve to remain cautious in further rate cuts. Federal Reserve Chairman Jerome Powell stated yesterday that the U.S. economy has performed very well recently, allowing policymakers to cautiously lower rates.

After the data release, U.S. stock futures dipped briefly, with the Nasdaq 100 futures down 0.9%.

The U.S. dollar index briefly rose over 20 points, reporting at 106.64.

The yield on the U.S. 10-year Treasury bond briefly rose, reporting at 4.435%.

Spot gold briefly fell about $6, reporting at $2562.2 per ounce.