U.S. Retail Sales Rose 0.3% in October -- 4th Update

By Harriet Torry 

U.S. retail sales rose in October at their slowest pace since the spring, another sign the nation's economic recovery is losing steam as coronavirus cases surge across the country.

Consumer-spending data from private companies suggest shoppers turned more cautious this month, too, as last month's jump in virus cases accelerated in November, prompting some officials to impose new restrictions, mask mandates and other mitigation strategies to slow its spread.

"We're going into a difficult winter," said James Sweeney, chief economist at Credit Suisse, pointing to rising Covid-19 infections, new local business restrictions and dimming prospects for a fresh government relief package this year.

Slowing payroll gains and waning government assistance mean "however you cut it, we should have weaker consumer spending over the next quarter or two than we had this summer," Mr. Sweeney said.

The Commerce Department said Tuesday that retail sales, a measure of purchases at stores, restaurants and online, rose a seasonally adjusted 0.3% in October from a month earlier. That was well below a 1.6% increase in September, and it marked the smallest monthly rise in retail sales since May, when spending rebounded from sharp declines in the early phase of the pandemic.

While spending on vehicles, electronics and at home-improvement stores increased last month, sales slipped in key categories such as grocery store, clothing and restaurant spending.

JPMorgan Chase & Co.'s tracker of 30 million credit and debit cardholders recorded a 4% decline in spending from a year earlier in the week through Nov. 13.

For much of October, the new coronavirus cases reported each day rose faster on average than during the week prior, according to a Wall Street Journal analysis of Johns Hopkins University data. By the middle of the month, the average number of new cases reported each day increased to more than 50,000. That more than tripled in following weeks to more than 166,000 new cases reported Monday. The U.S. has now reported more than 11.2 million confirmed infections, Johns Hopkins data show.

"I have to spend wisely because we're in a pandemic. You want to keep yourself healthy," said Michelle L. Busch, owner of Washington, D.C.-based events company Event Solutions DC.

Ms. Busch's spending has mostly been focused on her business, with occasional luxuries that include working out with a personal trainer, subscriptions to fitness apps and buying fresh fruit and vegetables.

The 42-year-old plans to stay home for the holidays this year since the big gatherings she usually attends are canceled. "It kind of makes me sad. The holidays are going to be really different," she said.

Online shopping continues to flourish. Sales increased 3.1% in October from the prior month at nonstore retailers, a category that accounts for online merchants, according to Tuesday's Commerce report. Retailers pushed an early start to the holiday shopping season in October with promotional events such as Amazon.com Inc.'s Prime Day.

Walmart Inc. reported Tuesday that e-commerce sales in the U.S. jumped 79% in the quarter ended in late October. People are making fewer trips to Walmart stores, shifting more spending online and stocking up when they do go to stores, the company said.

The retail giant's comparable U.S. sales, those at stores or digital channels operating for at least 12 months, rose 6.4% -- a slower pace than earlier in the coronavirus pandemic even as shoppers continued to buy up food and cleaning supplies and it pushed early holiday deals.

Retail sales can be volatile from month to month and subject to large revisions. Other data -- which include declining jobless claims in the week ended Nov. 7 and rising employment and manufacturing and service activity in October -- point to an economy that continues to recover from sharp drops in output earlier this year.

The Federal Reserve on Tuesday said its index of industrial production -- a measure of output at factories, mines and utilities -- rose a seasonally adjusted 1.1% in October. Output remains 5.6% below where it was in February, before the coronavirus pandemic hit, the Fed said.

Some sectors of the economy are profiting from low interest rates and consumer demand for improved residential and workspaces, as the pandemic keeps people working and studying at home.

The housing market, home-improvement businesses and online retailers have been particularly robust, reflecting the broader economy's K-shaped recovery that has seen some businesses thrive and grow, while others struggle or fail.

Home Depot Inc. reported strong sales growth in its latest quarter as the retailer continues to serve people spending more time on home-improvement projects during the pandemic.

Home-builder confidence in the U.S. increased in November for the seventh straight month, hitting a fresh record, according to a measure from the National Association of Home Builders released Tuesday.

Still, other data indicate the broader economic recovery remains on fragile ground as coronavirus cases rise. Consumer sentiment fell in early November, according to the University of Michigan's preliminary index for the month. Americans' outlook on the economy soured in the two weeks straddling the national elections, as Republicans grew more pessimistic and Democrats worried about the rise in coronavirus infections.

Fed Chairman Jerome Powell said Tuesday the increased spread of the coronavirus posed a significant risk to the economy in the months ahead and that it was too soon to say how positive developments about a vaccine would influence the outlook.

"Across the country, we're seeing new cases. We're seeing hospitalizations rise. And we're seeing states begin to impose some activity restrictions," Mr. Powell said during a virtual question-and-answer session. "The concern is that people will lose confidence in efforts to control the pandemic, and...we're seeing signs of that already."

Many retailers plan to close stores on Thanksgiving and have been offering earlier Black Friday deals online to reduce crowds -- posing potential challenges during the key holiday season for an economy that leans heavily on shoppers' willingness to consume.

Still, Jonathan Silver, chief executive of Affinity Solutions, a firm that aggregates consumer credit- and debit-card spending data, said he expects decent retail sales this holiday season as consumers who are saving on services such as travel spend those dollars on other things.

Matt Grossman, Sarah Nassauer, Jennifer Calfas, David Harrison and Nick Timiraos contributed to this article.

Write to Harriet Torry at [e-mail]

(END) Dow Jones Newswires

November 17, 2020 18:35 ET (23:35 GMT)

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