U.S. retail sales increase on autos in start to holiday season

U.S. retail sales advanced in October, boosted by a jump in autos purchases, while other categories signaled some momentum entering heading into the holiday season.

The value of retail purchases, unadjusted for inflation, increased 0.4% after an upwardly revised 0.8% gain in September, Commerce Department data showed Friday. Excluding autos, sales edged up 0.1%.

Eight of the report’s 13 categories posted increases, led by electronics and appliance stores. Auto sales posted the strongest advance in three months. E-commerce rose at a more moderate pace, possibly reflecting discounting during Amazon.com Inc.’s Prime Day as well as similar promotions at Walmart Inc. and Target Corp.

October’s data were mixed, but the upward revisions suggest consumers entered the final months of the year on a stronger footing than previously thought, and may portend a solid holiday-shopping season. However, inflation remains stubborn and several retailers are already considering hiking prices in anticipation of higher tariffs on imported goods under President-elect Donald Trump.

That may distort the retail sales data going forward – since they’re not adjusted for inflation, an advance could merely reflect higher prices rather than greater sales activity.

While September’s data was marked up substantially, August was revised down to a 0.1% decline.

“My view is that the consumer is due for a bit of a slowdown, and these data are consistent with that view, though they are certainly far from a disaster,” Stephen Stanley, chief US economist at Santander US Capital Markets, said in a note.

The data showed so-called control-group sales – which feed into the government’s calculation of goods spending for gross domestic product – decreased 0.1% in October, a notable step-down after rising by the most since the start of 2023. The measure excludes food services, auto dealers, building materials stores and gasoline stations.

However, over the past three months, control-group sales increased an annualized 4.6%, suggesting the economy got off to a good start at the end of the year.

Combined with firm inflation readings earlier this week, the data will likely keep Federal Reserve officials cautious in their approach to further interest-rate cuts. Speaking at an event Thursday, Chair Jerome Powell said the recent performance of the US economy has been “remarkably good,” giving policymakers to lower rates at a careful pace.

Treasury yields rose and the S&P 500 opened lower after the figures.

Separate data out Friday showed U.S. industrial production declined in October as the impacts from a Boeing Co. machinists’ strike and a pair of hurricanes reverberated through manufacturing for a second month.

The outlook for retailers is challenging as consumers remain financially stretched after years of high prices, and forecasts so far suggest consumers will pull back this holiday season compared to last. Also, the calendar effect of fewer shopping days between Thanksgiving and Christmas this year is expected to negatively impact sales.

Economists will be paying close attention to Black Friday and Cyber Monday sales to get a sense of consumers’ appetite for holiday shopping. Walmart and Target earnings next week will also help guide the outlook.

Not only are the retail figures unadjusted for price changes, they also largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Data later this month will provide more details on October inflation-adjusted spending on goods and services.

Spending at restaurants and bars, the only service-sector category in the retail report, climbed 0.7% last month.