- Retail sales rose 0.4% in October, driven by strong performances in auto dealerships, electronics stores, and restaurants.
- Inflation has slowed to 2.6%, letting consumers spend more as real wages outpaced price growth for the first time in years.
- Economists expect solid but moderate growth during the upcoming holiday shopping season, reflecting a mix of easing inflation and persistently high prices.
According to the Associated Press, American consumers boosted retail spending in October, driven by notable growth in auto purchases (+1.6%), electronics and appliances (+2.3%), and dining out (+0.7%).
While some categories, including clothing and furniture, experienced declines due to the lingering impacts of hurricanes, rebuilding activity likely drove growth at home and garden stores.
This Holiday Season
Retailers are preparing for the critical holiday shopping season, with spending forecasted to rise 2.5–3.5% YoY, trailing 2023’s 3.9% growth.
High prices continue to challenge households, though easing inflation has led to greater spending power. Inflation has cooled significantly from its 2022 peak of 9.1% and is currently standing at 2.6%—close to pre-pandemic levels.
Consumer confidence has surged, with the Conference Board reporting its largest monthly gain since 2021. The proportion of consumers anticipating a recession has also dropped to record lows. Unemployment remains low, further supporting spending.
Persistent Price Pressure
Despite gains in spending, grocery sales saw little growth, revealing a slight strain from higher food costs. For consumers like Lorraine Thompson in Secaucus, NJ, inflation remains palpable: “Everything is high—the meat, the cheese.”
Buy-now, pay-later services like Affirm benefit from a growing consumer willingness to shop, with active users rising to 20M. Retailers like Walmart (WMT) and Target (TGT), set to report earnings next week, will provide deeper insights into consumer behavior during this pivotal shopping season.
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Why It Matters
Retail spending is a key driver of U.S. economic growth, which expanded at an annualized 2.8% in Q3 and appears poised for a robust holiday season performance in Q4. Analysts see steady growth ahead but with uncertainties tied to inflation and potential trade policies under the incoming Trump administration.
For now, American consumers are balancing challenging prices and times with relative optimism, keeping the U.S. economy on a steady trajectory forward.
