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PNC Chief Economist Gus Faucher: Modest Increase in Retail Sales in October

Michigan Business Network
November 18, 2020 7:00 AM

Working at PNC Financial Services Group: 6,167 Reviews | Indeed.com

; Outlook for Holiday Spending Bleak

Retail sales increased 0.3 percent in October, according to the Census Bureau; this was slightly below the consensus expectation for a gain of 0.4 percent. Sales growth in September was revised down to a 1.6 percent increase, from the initially reported 1.9 percent increase.

This was the smallest increase in retail sales since they plunged during the early stages of the pandemic as businesses shut down. Retail sales fell 4 percent in March and 15 percent in April, then jumped 12 percent in May and 8 percent in June. Sales growth was then between 1 and 2 percent each month in July through September. October retail sales were almost 5 percent their February, pre-pandemic level.

Sales excluding autos were up 0.2 percent over the month, as were sales excluding autos and gasoline. Control retail sales—sales excluding autos, gasoline, food service, and building supplies, and which go into consumer spending in GDP—were also up 0.2 percent in October.

On a year-ago basis total retail sales were up almost 6 percent, including increases of 4.4 percent excluding autos and 6.5 percent excluding autos and gasoline. Control sales were up almost 10 percent year-over-year in October.

Sales growth was mixed across segments in October. Sales of autos rose 0.7 percent over the month, sales at electronics and appliance stores rose 1.2 percent, and sales at building supply stores rose 0.9 percent. Gasoline sales were up 0.4 percent. But sales at clothing stores fell more than 4 percent, as did sales at specialty stores (like sporting goods and hobbies). Grocery store sales fell 0.4 percent over the month, and there was a 0.1 percent decline in restaurant sales. Sales at general merchandise stores fell more than 1 percent in October from September.

Sales at non-store retailers, primarily online sales, continue to surge; they were up 3.1 percent in October from September, and 29 percent in October from a year earlier. The pandemic has accelerated the trend toward online sales and away from traditional brick-and-mortar retailers.

Consumer spending has settled down after big swings in 2020. Retail sales plunged in March and April as consumers stayed home and businesses closed down, and then surged in the late spring and early summer as consumers ventured out again and businesses reopened. One-time stimulus checks and bonus unemployment insurance benefits allowed households to boost their spending, and low interest rates encouraged purchases of big-ticket items like cars and appliances.

But the outlook for the rest of 2020, including the important holiday sales season, is highly uncertain. On the plus side many households still have leftover cash from stimulus efforts, the job market is recovering, and interest rates remain very low. But the resurgence of the pandemic may discourage shoppers from going out. And stimulus cash is running out for the millions of households with unemployed workers, forcing them to cut back. PNC expects holiday sales to be down about 3 percent from 2019, excluding online sales, which are expected to increase more than 25 percent from last year.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

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Michigan Business Network is an online broadcasting company that provides knowledge, news, and insights into Michigan’s businesses, industries, and economy.