Retail sales jump 0.8% in sign of consumer health

Christopher S. Rugaber
Associated Press

Washington — American consumers ramped up their spending last month in a sign of robust health heading into the crucial holiday shopping season.

Retail sales rose 0.8 percent in October, after an upwardly-revised 1 percent gain in September, the Commerce Department said Tuesday. The two-month increase was the largest since the spring of 2014.

The numbers suggest that the economy may grow more quickly in the final three months of the year than many economists had expected. Retail sales are closely watched as a sign of consumer health. Consumer spending makes up about 70 percent of the economy.

Steady hiring and emerging signs of solid pay increases have made Americans more confident and willing to spend. The unemployment rate fell last month to a low 4.9 percent and in October, workers saw the biggest annual pay gain since the end of the recession.

Some of the biggest sales increases were in autos and gas, with higher prices boosting gas station sales. Even excluding those categories, however, sales rose 0.6 percent in October and 0.5 percent the previous month.

Auto sales rose a healthy 1.1 percent, though many dealers relied on steep discounts. Sales of home and garden supplies also rose 1.1 percent in October, a positive sign that more Americans are remodeling and expanding their homes.

Most other retailers also saw healthy increases: Grocery stores, health and personal care outlets, sporting goods retailers, clothing stores, and online and catalog retailers all reported strong sales.

Online and catalog retailers are continuing to seize market share from older-line outlets such as department stores. Online and catalog sales have increased 12.9 percent in the past year, much faster than the 4.3 percent gain for all retailers. Department stores, meanwhile, have seen their sales plunge 7.3 percent in the past 12 months.

Furniture stores were one of the few to report a drop in October, with sales falling 0.9 percent.

Steady hiring may be boosting spending. Employers have added about 175,000 jobs a month this year, down from last year’s pace but still enough to push unemployment even lower over time.

That appears to be boosting consumer confidence, which has been mostly healthy in recent months. A measure of consumer sentiment by the University of Michigan rose in the first half of November.

Even with solid growth in the October-December quarter, the economy has been weak this year. It expanded at just a 1.1 percent pace in the first six months of 2016. It accelerated to a 2.9 percent pace in the July-September quarter.

Even with a healthier expansion in the fourth quarter, growth may not reach 2 percent for the full year.