WASHINGTON: U.S. retail sales were unexpectedly flat in October, though consumer spending appears to have remained on a solid footing at the start of the fourth quarter despite the rising cost of living that is forcing some households to scale back.
The unchanged reading in retail sales reported by the Commerce Department's Census Bureau on Tuesday followed a downwardly revised 0.1% gain in September. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, edging up 0.1% after a previously reported 0.2% rise in September.
The report, originally due in mid-November, was delayed by the 43-day shutdown of the government. Americans are facing higher prices for food, furniture and a range of other imported goods, the result of President Donald Trump's sweeping import duties. Healthcare and housing costs have also surged.
Economists say lower- and middle-income households have been disproportionately impacted by the soaring cost of living. Trump, who last year swept to election victory on promises to tame inflation, has in recent weeks alternated between dismissing affordability problems as a hoax, blaming former President Joe Biden, and promising his economic policies will benefit Americans next year.
A Bank of America Institute report showed higher-income households continuing to fuel discretionary spending growth, creating what economists have termed a K-shaped economy.
It noted that households making an annual income of $100,000 and above were spending on entertainment. Top income earners were spending more on clothing as well as on airline travel and stays at hotels.
"However, for lower-income households ... travel and clothing are seeing stronger pullbacks, underscoring the growing gap in income groups' economic experiences," Bank of America Institute said.
Retail sales excluding automobiles, gasoline, building materials and food services surged 0.8% in October after an unrevised 0.1% dip in September. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Economists still expect that consumer spending supported gross domestic product growth in the third quarter. Prior to the report, the Atlanta Federal Reserve estimated GDP increased at a 3.6% annualized rate last quarter. The economy grew at a 3.8% pace in the April-June quarter. The government will release the delayed first estimate for third-quarter GDP to next Tuesday.
Source Name : Economic Times