Americans hit the brakes on retail spending in October as they confronted still-high inflation and steep interest rates.
Retail sales, a measure of how much consumers spent on a number of everyday goods including cars, food and gasoline, fell 0.1% in October, the Commerce Department said Wednesday. That is above the 0.3% decline projected by Refinitiv economists but below the revised 0.9% gain recorded in September.
Excluding the more volatile measurements of gasoline and autos, sales climbed 0.1% last month.
The October advance is not adjusted for inflation, meaning that consumers may be spending the same but getting less bang for their buck.
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“The highly anticipated slowdown in retail spending has started, but it’s not drastic, and October’s numbers would seem pretty good if not stacked against September’s blockbuster report,” said Robert Frick, corporate economist at Navy Federal Credit Union.
Consumers continued to spend at grocery stores, electronics and appliance stores, health and personal stores and restaurants and bars – a bellwether of discretionary spending. They also continued to open their wallets when online shopping, with spending at non-store retailers climbing 0.2% from the previous month.
However, they pulled back their spending on big-ticket items such as cars and furniture. Spending also dropped at miscellaneous shops.
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Sales fell in seven of 13 retail categories last month.
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A solid job market and big wage increases have helped to buoy consumer spending in recent months, despite high inflation. However, many economists have been predicting that consumers will grow more cautious as student loan payments resume, and high-interest rates continue to work their way through the economy.
On top of that, more Americans are relying on their credit cards to cover necessities.
Credit card debt surged to a new record in the third quarter, while delinquencies are also on the rise.
“Consumer spending momentum in [the fourth quarter] will likely slow but the solid appetite for online shopping bodes well for the upcoming holiday sales period,” said Jeffrey Roach, chief economist at LPL Financial.
He added, “Easing inflation pressures will provide some salve for the markets but some forward-looking indicators such as delinquencies hint at some emerging challenges as we head into 2024.”