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US Retail Sales have made a comeback after consistent decline since 2015, with the auto industry and related industries like gas being the main consumer focus.

The U.S. Census Bureau has released October’s Advance Monthly Retail Trade and Food Services Survey which provides an initial estimate at monthly retail and food sales for firms within the US with a sample size of approximately 5,500 companies.

Key Takeaways

• Retail spending jumped 0.8% in October, 0.3% higher than expected even in the strengthening economy
• October sales are up 4.6% from this time last year
• Sales at gas stations jumped 3.5%, reflecting higher prices
• The US government revised initially positive growth readings for the previous two months to reveal contractions
• The sudden rebound in vehicle sales may be due to recovery in areas affected by recent hurricanes

With an initially positive September and August reading revised to show contraction, it’s possible that the 3.5% growth reading for the US Q3 2018 GDP may also be revised lower than initial estimates.

However, there does seem to be strong economic activity with a tightening labor market and higher take-home wages coming in to play. Much of the retail sales are due to the rise in fuel prices, and the plunge in recent oil price signals show that price relief may be imminent. Sales of new cars and trucks jumped 1.1%, and overall retail sales ignoring auto sales rose 0.3%.

With rising incomes at a 9-year high, record unemployment, and more open job positions than skilled workers, the holiday season is expected to be a busy one in terms of consumer spending which will in turn stimulate the economy.

However, the stock market has taken a big hit recently and the housing market is undergoing steady decline due to rising interest rates.

Expert Outlook

Senior economist Avery Shenfeld of CIBC World Markets said: “There are plenty of worries about slowing global growth these days, but don't tell that to American shoppers, who were still out on a spending spree at stores in October. Look for consumer spending to remain a healthy growth contributor for Q4 as a whole, helped by better wages and ongoing job growth, but the quarter/quarter impacts of tax cuts are fading from these numbers relative to what we saw in the spring.”

Senior economist with Capital Economics Michael Pierce says that there are indications that consumer spending will start to slow down and that this will impact next year’s economic growth:

“With consumer confidence still high, much of this extra cash is likely to filter through to spending on other goods and services,” he said. “But we doubt that will be enough to replace the boost from the earlier fiscal stimulus or offset all of the headwind from tighter monetary policy. Accordingly, consumption growth still looks set to slow next year.”

Market Reaction

Spot gold continues to hold above the $1,200 line of support and is up today by 0.45% and trading at 1,213.20/oz with December Comex Futures trading at $1,214.30/oz and up 0.35%.