NEW YORK – Retail sales in the U.S. grew a sluggish 0.3% in October, even as retailers offered early holiday discounts online and in stores.
A surge in coronavirus infections nationwide and the expiration of a $600 weekly boost to unemployment checks over the summer has slowed spending by Americans and contributed to the slowest retail sales growth since this spring, when the pandemic shuttered stores, theaters, restaurants and work places.
Economists had expected sales to rise 0.5%, already a significant tail off from September's gain of 1.6%.
The data “point to a consumer sector that is becoming more cautious in its spending habits,” said Jim Baird, chief investment officer at Plante Moran, a financial advisory firm. “Weaker sales likely reflect several headwinds: the slowing recovery, the recent surge in COVID-19 cases across the country...and the reduction in fiscal support for sidelined workers.”
Most of the gain occurred in just a few areas that reveal how the pandemic has altered spending trends in America. Sales rose at home and garden stores, electronics and appliance stores, and online retailers. Those increases likely reflect ongoing home renovations and perhaps more computer purchases by those working from home and those families with children learning online.
Many Americans likely withdrew a bit out of fear of the virus: Spending at restaurants and bars fell 0.1% in October, the first drop in six months, even before many new restrictions on indoor dining and curfews on bars were announced in recent days.
There is other evidence of growing consumer caution: Overall spending actually fell in early November, according to JPMorgan Chase, which anonymously tracks activity on 30 million of its debit and credit cards. The decline was somewhat worse in states with viral spikes, such as North Dakota and Iowa. Nationwide, spending fell to 7.4% below a year ago, JPMorgan said, a drop of about 2.5 percentage points from two weeks earlier.
The cutbacks could slow the economy in the final three months of the year, with some analysts forecasting growth of just 3% or 4% at an annual rate, down from a huge 33.1% snap back in the July-September quarter.
Best Buy, Target and Walmart offered holiday deals in mid-October to piggyback on Amazon, which held its annual Prime Day sales event in the fall after it was postponed this summer due to the pandemic. Online shopping jumped 3.1% in October and has soared by nearly a third in the past year.
It was hoped that retailers would be able to entice Americans who to get a jumpstart holiday shopping and avoid crowds.
Yet at clothing stores and sporting good shops, sales fell more than 4%. Department stores had a bigger drop, down nearly 5%.
The Commerce report covers only about a third of overall consumer spending. Services such as haircuts and hotel stays, which have been badly hurt by the pandemic, are not included.