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WASHINGTON—American consumers picked up their spending in October, a sign fourth-quarter outlays began on a strong footing amid a robust labor market and high consumer confidence.
Sales at retail stores and restaurants rose 0.8% from the prior month to a seasonally adjusted $511.5 billion in October, the Commerce Department said Thursday. Compared with a year earlier, sales grew 4.6%.
October’s reading was well above the 0.5% increase economists surveyed by The Wall Street Journal had expected.
Consumer spending is a key driver of the U.S. economy, representing about two-thirds of economic output. The jump in retail sales in October bodes well for the key holiday shopping season, as consumers spent more on clothing, sporting goods and electronics.
Still, retail sales for the prior two months were also revised lower, to a 0.1% decline in both September and August from a previous estimate of a 0.1% increase in both months.
October’s sales gain was due in part to a 3.5% month-over-month increase in spending at gasoline stations. Gas was slightly pricier for U.S. drivers in October, costing $2.86 a gallon on average, up two cents from September, according to the U.S. Energy Information Administration.
Excluding motor vehicles, sales were up 0.7% in October, and excluding gasoline, sales were up 0.5%. Excluding both categories, sales were up 0.3% last month.
Retail sales data can be volatile from month to month. Sales at department stores increased 1.3% in October, the strongest pace for that category since May. Sales at nonstore retailers, such as purchases made online or from mail-order catalogs, rose 0.4%.
The Commerce Department said it couldn’t isolate the effects of two recent storms -Hurricanes Michael and Florence- in the report. Sales at building and garden suppliers increased 1% last month, the strongest pace since May.
Overall consumer spending was strong in the third quarter, a trend which Friday’s report suggests continued at the start of the fourth quarter. The unemployment rate remained a low 3.7% in October, a positive sign for earnings growth and outlays.
Walmart
Inc.
on Thursday reported higher sales in the third quarter and Chief Executive Doug McMillon said the retailer is benefiting from “a favorable economic environment in the U.S.”
Earlier this week,
Home Depot
Inc.
reported higher third-quarter earnings and raised its full-year guidance. Chief Executive Craig Menear said on the company’s earnings call Tuesday that “overall the environment for home improvement is solid.”
Macy’s
Inc.
also delivered healthy sales growth in its latest quarter and raised its guidance for the year, positioning the retailer for a strong holiday shopping season.
Consumer sentiment also remained strong in early November, according to a report from the University of Michigan last week. A survey of consumer expectations by the Federal Reserve Bank of New York released earlier this week found household income growth and spending expectations increased notably in October.
That suggests Americans could increase their spending heading into the holiday retail season. A recent survey of about 2,000 people by The Conference Board found consumers intend to spend about $627 on gifts this season, up from an estimated $560 last year.
The Federal Reserve closely eyes consumer spending data as a gauge of economic growth, and central bank officials said after their meeting earlier this month that household spending “has continued to grow strongly.” Officials last raised their benchmark interest rate in September to a range between 2% and 2.25%, and they are widely expected to raise the rate again by a quarter percentage point in December.
Write to Harriet Torry at [email protected] and Sarah Chaney at [email protected]
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