U.S. retail sales declined for the first time since March last month, as Americans cut back spending on big-ticket items such as cars, furniture and building materials. The decline was smaller than expected, however, as consumer spending remains robust ahead of the holiday season, despite high prices and equally high interest rates. According to advance estimates from the U.S. Census Bureau, total retail and food services sales – including spending at stores, online and in restaurants – amounted to $705 billion in October, down 0.1 percent from June and up 2.5 percent from October 2022.
While retail sales have been surprisingly resilient throughout the inflation crisis, it’s important to note that consumer prices grew by 3.2 percent in October, meaning that the 2.5 percent year-over-year increase in retail sales is entirely attributable to higher prices. Adjusted for inflation, consumer spending actually declined by 0.7 percent in October, as it did in 10 of the past 12 months.
As the following chart shows, the entire increase in retail sales over that past two years can be attributed to rising prices, as shoppers are simply getting spending more bucks for the same bang. Between October 2021 and October 2023, monthly retail and food services sales (adjusted for seasonal variations, holiday and trading day differences) have increased by 12 percent. Adjusted for CPI inflation, sales have have virtually flatlined over the past two years.