By Harriet Torry
U.S. shoppers boosted their buying in October for the sixth month in a row, but the pace of growth slowed considerably amid rising coronavirus cases and uncertainty ahead of the U.S. presidential election.
Retail sales increased a seasonally adjusted 0.3% in October from a month earlier, the Commerce Department said Tuesday. That fell short of economists' expectations for a 0.5% rise, and was well below the 1.6% gain in September.
Sales dipped in a number of key categories. Grocery-store sales dropped 0.4%, bar and restaurant receipts declined 0.1%, and both sporting goods and clothing sales fell 4.2%.
Sales increased 3.1% from the prior month at nonstore retailers, which accounts for online merchants. Retailers pushed an early start to the holiday shopping season in October with promotional events like Amazon.com Inc.'s Prime Day.
"It looks like retailers are working really hard to get an early start to the holiday season," said Stephen Stanley, chief economist at Amherst Pierpont Securities.
He noted consumers have responded to the coronavirus pandemic's effects by increasing their spending on goods like new cars and home fitness equipment while cutting back on in-person services that involve proximity to other people, like movie theaters, manicures and air travel.
As a result, retail sales have roared back from steep declines in March and April while spending on services such as haircuts, vacations and music events has continued to lag behind.
Home Depot Inc. on Tuesday reported higher revenue and earnings in its third fiscal quarter, and pledged to permanently increase compensation for its hourly workers. The quarter ended Nov. 1 bookended a robust summer season for the Atlanta-based home-improvement retailer, which has thrived as people spend more time isolated during the coronavirus pandemic.
Other signs of continuing economic recovery include declining jobless claims in the week ended Nov. 7 and rising employment and manufacturing and service activity in October.
In a Wall Street Journal survey earlier this month, economists projected U.S. gross domestic product would shrink by 2.7% this year, measured from the fourth quarter of 2019, better than the 3.6% contraction they forecast in October.
Still, other data indicate the broader economic recovery remains on fragile ground as coronavirus cases continue to rise precipitously. Federal Reserve Chairman Jerome Powell last week said the U.S. rebound, though faster and stronger than officials had expected, has slowed "quite a bit" in recent months.
"We do see the economy continuing on a solid path of recovery, but the main risk we see to that is the further spread of disease here in the United States," he said Thursday.
Consumer sentiment also fell in early November, according to the University of Michigan's preliminary index for the month. Americans' outlook on the economy soured in the two weeks straddling the national elections, as Republicans grew more pessimistic and Democrats worried about a surge in coronavirus infections.
Recent real-time consumer spending data from private companies suggest shoppers turned more cautious as the U.S. logged record coronavirus infection counts in early November.
JPMorgan Chase & Co. said Friday its tracker of 30 million credit and debit cardholders recorded a 7.4% decline in spending from a year earlier in the week through Nov. 9, the weakest reading since early September.
More consumer spending has shifted online as millions of Americans stayed home for work and school and avoided in-person shopping.
Walmart Inc. reported Tuesday that e-commerce sales in the U.S. jumped 79% in the quarter ended in late October. People are making fewer trips to Walmart stores, shifting more spending online and stocking up when they do go to stores, the company said.
The retail giant's comparable U.S. sales, those at stores or digital channels operating for at least 12 months, rose 6.4% -- a slower pace than earlier in the coronavirus pandemic even as shoppers continued to buy up food and cleaning supplies and it pushed early holiday deals.
Many retailers plan to close stores on Thanksgiving and have been offering earlier Black Friday deals online to reduce crowds -- posing potential challenges during the key holiday season for an economy that leans heavily on shoppers' willingness to consume.
"I have to spend wisely because we're in a pandemic. You want to keep yourself healthy," said Michelle L. Busch, owner of Washington, D.C.-based events company Event Solutions DC.
Ms. Busch's spending has mostly been focused on her business, with occasional luxuries that include working out with a personal trainer, subscriptions to fitness apps and buying fresh fruit and vegetables. She recently moved from a shared house to a one-bedroom apartment since she got a good deal on her new rent.
The 42-year-old plans to stay home for the holidays this year since the big gatherings she usually attends are canceled. "It kind of makes me sad. The holidays are going to be really different," she said.
Still, a number of economists are expecting the holiday season to bring some cheer to retailers since the pandemic has prompted Americans to sock away more money.
The personal-saving rate, the portion of after-tax income that consumers don't spend, was a seasonally adjusted 14.3% in September, according to the Commerce Department, nearly double the 7.3% rate in September 2019. That means households have a financial buffer despite a high unemployment rate and pandemic-related uncertainty.
Matt Grossman and Sarah Nassauer contributed to this article.
Write to Harriet Torry at harriet.torry@wsj.com
(END) Dow Jones Newswires
11-17-20 0920ET
