U.S. consumers continue to open up their wallets, according to the October retail sales report.
Retail sales rose 0.3% last month, the measure’s seventh gain in eight months. Retail sales’ rise was led by a 1.1% gain in gasoline store sales and a 0.9% increase in sales at “non-store retailers.” Furniture and clothing sales dropped the most of all categories. Control group sales, which we view as a cleaner measure of retail sales’ contribution to gross domestic product (GDP), rose 0.3%.
Data on consumer activity is especially important to watch these days. Consumer spending has powered the U.S. economy this year as companies have curbed investments while waiting for trade and geopolitical uncertainty to fade. As shown in the LPL Chart of the Day, consumer spending has largely propelled GDP over the past two quarters, countering business spending’s noticeable drag on growth.
“U.S. consumer activity has been largely immune from global headwinds, even as other parts of the economy have succumbed to uncertainty,” said LPL Financial Senior Market Strategist Ryan Detrick. “To be fair, consumers have several reasons to be optimistic. Employment is the primary driver of consumer health, and the U.S. labor market has been resilient.”
There are risks to the consumer outlook emerging, though. Signs have emerged that U.S. consumers are becoming more nervous, and October’s retail sales report showed that spending fell for certain items. Still, we see enough evidence to think the consumer will continue to anchor this record 10-year expansion.
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