- Francis Généreux
Principal Economist
Retail Sales Climb Again While Hurricanes and Strikes Hit Industrial Production Once More
Highlights
- Retail sales rose 0.4% in October after gains of 0.8% in September (revised up from 0.4%). Excluding cars and gasoline, sales were up 0.1%.
- Industrial production fell 0.3% in October after a 0.5% drop in September (revised from -0.3%). As in September, hurricanes and a strike in the aerospace sector hampered industrial activity.
Comments
Total retail sales grew only slightly more than expected. But the size of the upward revision to the September data was somewhat surprising, revealing relatively strong growth.
As expected, motor vehicles and parts drove the increase in total sales. Once we exclude dealer sales, growth in other retail sales categories amounted to only 0.1%. But gasoline station sales didn't fall as expected. Instead, they edged up 0.1%, even though gasoline prices continued to slide in October.
Lacklustre sales in other categories may nevertheless be viewed as somewhat disappointing. However, a small 0.1% uptick in sales, excluding motor vehicles and parts dealers and gasoline stations, actually isn’t so bad after the 1.2% jump in September (revised from 0.7%). The revised September data was actually the best monthly reading since January 2023. In addition, some of the sales volatility in recent months may be due to hurricanes, including Hurricane Milton in October. It’s also worth pointing out that most of October’s weak spots were in categories that saw substantial gains in September.
So the trajectory of retail sales isn't really cause for concern. The overall trend is still relatively robust. If we adjust today’s sales data in light of the October CPI print, we see that real sales—and probably real goods consumption—started the final quarter of 2024 on the right foot, even though growth may have cooled somewhat after running rather hot in the third quarter. This is still a good sign as we get close to the holidays. But we need to see how the election of Donald Trump affects consumer confidence, and how that will affect the buying intentions of US households.
Hurricanes and the Boeing strike (which has now ended, but lasted throughout October) hit industrial production once again. Hurricanes probably shaved 0.1 percentage points off growth, while the strike likely sent it down another 0.3 percentage points. Since these negative factors are now behind us (although some of the repercussions may persist), industrial production should bounce back in November. Over the longer term, we'll need to see how the policies that the Trump administration implements next year will affect US production. In the short term, before tariffs come into effect, Trump’s win could actually boost production. As for the medium term, the higher cost of imported inputs and uncertainty over a potential trade war could bite.
Implications
Despite setbacks like hurricanes and strikes, the US economy is holding up. Federal Reserve Chair Jerome Powell said yesterday that there is no need to hurry to cut rates. The indicators published today provide no evidence to the contrary. For the time being, we're still expecting a 25-point cut in December, but the risks remain skewed towards a slower pace of easing.