Weak US consumer sentiment bypassed in latest retail sales report

Summary:  US retail sales up by 1.7% in October, greater than 1.1% expected; weak consumer confidence not translated into spending; “broad strength” amongst “core” retail categories, implies solid pre-Christmas period; rises in all retail categories except two; “Non-store” segment” the largest single influence, rises 4.0%.

US retail sales had been trending up since late 2015 but, commencing in late 2018, a series of weak or negative monthly results led to a drop-off in the annual growth rate below 2.0%. Growth rates then increased in trend terms through 2019 and into early 2020 until pandemic restrictions sent it into negative territory. A “v-shaped” recovery then took place which was followed by some short-term spikes as federal stimulus payments hit US households in early 2021.

According to the latest “advance” sales numbers released by the US Census Bureau, total retail sales increased by 1.7% in October. The rise was greater than the 1.1% increase which had been generally expected as well as September’s +0.8% after it was revised up from 0.7%. On an annual basis, the growth rate accelerated from September’s revised figure of 14.3% to 16.3%.

“Consumer confidence measures have been weak but this has not passed through into actual spending,” said ANZ senior economist Catherine Birch.

US Treasury bond yields moved moderately higher on the day. By the close of business, the 2-year Treasury yield had inched up 1bps to 0.53%, the 10-year yield had added 3bps to 1.65% while the 30-year yield finished 4bps higher at 2.04%.

“The core measure of retail was even stronger relative to consensus at 1.6% against 0.9% expected. It is notable that amongst the core group there was broad strength amongst the retail categories, indicating strength in discretionary spending in the lead up to Christmas,” said NAB senior economist Tapas Strickland.

All except two of the categories recorded higher sales over the month. The “Non-store retailers” segment, provided the largest single influence on the overall result, rising by 4.0% for the month and by 10.2% for the year. Sales of vehicles, as well as petrol (“gasoline”) station sales also had significant influences on the total, with each segment rising by 1.8% and 3.9% respectively.

The non-store segment includes vending machine sales, door-to-door sales and mail-order sales but nowadays this segment has become dominated by online sales. It now accounts for a little over 14% of all US retail sales and it has become the second largest segment after the vehicles and parts segment.

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