- US retail sales increased 0.3% in October, coming in below the consensus economist estimate of 0.5%.
- Spending at retailers also contracted from the month prior as lead-in to the holiday season squared off with soaring COVID-19 case counts.
- The reading still marks a sixth straight monthly improvement, although its still a sizable drop from September’s 1.6% expansion.
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Americans spent less at retailers than expected in October as the economic recovery decelerated amid a worsening pandemic.
US retail sales gained 0.3% last month, according to the Census Bureau. Economists surveyed by Bloomberg expected sales to increase by 0.5%. The reading also marked an decline from September’s 1.6% increase.
The October report does, however, mark the sixth straight jump in retail spending since consumer spending froze in April. Stimulus measures including the $US2.2 trillion CARES Act fuelled a V-shaped rebound through the summer as households’ balance sheets were bolstered by direct payments and expanded unemployment benefits. Spending still sits well above pre-pandemic levels, but the mild pace of improvement signals its recent strength might be waning.
Any slowdown would have serious effects on the broad recovery. Retail spending accounts for 70% of economic activity, and after record gross domestic product growth in the third quarter, growth is expected to slow significantly through the end of the year. The next few months also mark a make-or-break point for retailers, as the holiday season fuels the busiest spending months of the year.
Spiking COVID-19 cases place critical fourth-quarter spending at serious risk. The US reported 148,532 new cases on Monday, bringing the total number of infections above 11 million, according to The COVID Tracking Project. Hospitalizations surpassed 73,000 and deaths neared 240,000.
Cities began announcing new lockdown measures earlier in November, and early readings from consumer sentiment gauges show Americans quickly growing more pessimistic toward the US economy’s future.
It’s unlikely any stimulus aid will help offset the drop in consumer confidence. President Donald Trump urged Congress to pass a “big and focused” relief bill in a Saturday tweet, but major areas of difference remain between Democrats and Republicans.
White House negotiations with Democrats on a new package dissolved ahead of November’s elections. Senate Majority Mitch McConnell now leads talks on stimulus, and his prior calls for a $US500 billion bill square off with Democrats’ urges for a sweeping $US2.2 trillion measure.
A Biden administration may be able to reach a compromise, but that punts stimulus into the new year. Americans may need to wait through the holiday season and the virus’s deadliest wave yet before seeing new fiscal support.
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