US Retail sales edge up 0.1% in October, but stronger details emerge

Retail sales rose 0.1% (M/M) in October, below market expectations for 0.3%. Excluding autos (-0.5%) and gas (-0.9%), sales rose a more robust 0.3%. The retail control group, used in the calculation of GDP rose 0.2% and was upwardly revised for September (to +0.1% from -0.1%)

The biggest gains across categories were in miscellaneous retailers (+1.8%) and non-store retailers (+1.4%). Aside from gasoline stations, the biggest declines were electronics (-0.4%) and general merchandise (-0.4%).

The trend toward greater services consumption is most evident in year-over-year sales at eating and drinking establishments, which are up 7.0%. This makes it the strongest single category over the last year, even beating out sales of motor vehicles and parts (+6.0% y/y).

Retail sales are not the measure they used to be. They appear weaker when inflation is subdued and exclude a large share of the basket of services consumed by households. They can therefore be a head fake for measuring real consumer spending activity. This appears to be the case again in October. The weakness in the headline measure masks the fact that auto sales are near record highs and saving from lower gasoline prices are boosting services spending.

"We expect real consumer spending to continue to see decent gains through the remainder of this year, weakness in nominal retail sales notwithstanding", says TD Economics.