*U.S. retail sales increased by 0.3% m/m in October ‑- following its 1.6% m/m increase in September ‑- its smallest monthly gain in this recovery (Chart 1). Since June, retail sales has exceeded its pre-pandemic level, so this moderation is expected and is consistent with our forecast that U.S. real GDP growth will slow to 4.2% q/q annualized in Q4, following its 33.1% q/q annualized increase in Q3.

 

*Retail sales were broadly weak in October, with eight of the 13 categories declining (Chart 2). Control retail sales (excludes gasoline stations, food services and drinking places, building materials, and auto sales), which factor directly into GDP, increased by 0.1% m/m, a marked slowdown from September’s 0.9% m/m gain (Chart 3). Despite the broad-based weakness in October’s sales, eight (out of 13) categories remained above February’s levels (Table 1).

 

*Based on October’s retail sales, personal consumption growth (includes a broader range of services) likely moderated in October from 1.4% m/m in September. The rebound in consumption has been slower than that of retail sales ‑- consumption was 2.0% below its pre-pandemic level in September ‑- because it is made up of mostly services that have been disproportionately affected by the pandemic. We expect the personal saving rate to decline from 14.3% in October, but remain elevated.

 

The massive $2.7bn increase in non-store retail sales (includes online) to $88.2bn in October ‑- an all-time high – more than offset the declines in other sales categories (Chart 4). Non-store sales were boosted by promotional sales events in October from key online retailers and by reduced visits to physical retail locations due to the rapid increases in COVID-19 cases and hospitalizations. We expect online sales to continue to grow strongly through the holiday shopping season.

 

Sales at housing-related retailers remained impressive (Chart 5). Sales at building materials, garden equipment, and supply stores jumped by $330m to $38.1bn, an all-time high, lifting its yr/yr growth to 19.5%. Sales at electronics stores increased by 1.2% m/m, reversing its 1.1% m/m decline in September, placing it just 3.7% below February’s level, and sales at furniture and home furnishing stores declined by 0.4% m/m, remaining near its all-time high and above its pre-pandemic level (+2.7%).

 

Food and beverage store sales (includes grocery, beer, wine, and liquor stores), and restaurant and bar sales both declined in October (Chart 6). Although sales at restaurants and bars had increased consistently in prior months, it is the worst performing retail category, down 14.9% since February (Table 1). We expect restaurant and bar sales to continue to decline in the coming months as state and local governments increase restrictions on indoor dining to slow the spread of COVID-19 and as colder weather makes outdoor dining less appealing. Sales at grocery stores, which are 10.0% above February’s level, will likely continue to outperform.

 

High frequency indicators suggest that retail momentum is slowing (Chart 7). North American retail traffic - estimated using sensors mounted on doors at stores in the U.S. and Canada - declined 46% yr/yr during the first week of November, the largest decline since late August, and consumer credit and debit card spending slowed towards the end of October to a 1.5-month low (Real-time insights, economic and financial pulse, November 16, 2020).

 

Table 1: Retail sales trends since February

Sources: Census Bureau and Berenberg Capital Markets

 

Chart 1:

 

Chart 2:

Sources: Census Bureau and Berenberg Capital Markets

 

Chart 3:

Chart 4:

Chart 5:

Chart 6:

 

Chart 7:

 

Roiana Reid, roiana.reid@berenberg-us.com

 



Member FINRA & SIPC

This email and any files or attachments transmitted with it may contain confidential or privileged information and are intended solely for the use of the intended recipient. If you are not the intended recipient, please do not copy, retain, disclose or use any part of the message or its attachments. Please notify the sender immediately by return email and destroy or delete any copies. Dissemination or use of this information by anyone other than the intended recipient is unauthorized and may be illegal. Communications by email cannot be guaranteed to be secure or error-free. Emails and their attachments are subject to being intercepted, becoming corrupted, getting lost or delayed, or may contain viruses. Therefore, neither the sender nor Berenberg Capital Markets LLC (BCM) accepts any liability for any errors or omissions in the content of this message or problems in its transmission, including those arising as a result of its transmission over the internet.

BCM does not assume liability for the correctness and completeness of all information given and/or attachments contained herein. The provided information has not been checked by a third party, especially an independent auditing firm. BCM explicitly points to the stated date of preparation. The information given can become incorrect due to passage of time and/or as a result of legal, political, economic or other changes. BCM does not assume responsibility to indicate such changes and/or to publish an updated document. Any document(s) or attachment(s) is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.

In light of upcoming regulatory changes, please be informed that BCM will continue to share information with you until unsubscribe@berenberg-us.com receives your termination/deletion request. For more information about the General Data Protection Regulation (GDPR) and our privacy policies please refer to https://www.berenberg-us.com/legal-notice. BCM reserves all the rights in this communication. No part of this communication or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without BCM’s prior written consent.

The information contained herein and sourced may have been adopted from various news sources, for example, Bloomberg, Reuters, Street Account and various other sources. BCM does not claim accuracy, completeness, timeliness, suitability, or otherwise regarding all the information on the securities, stock markets, or developments referred to within. On no account should the Content be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgments. BCM is not responsible for any recipient(s) use of this information. This Content is not a solicitation or an offer to buy or sell any of the securities contained herein. This information does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of clients. Clients should consider whether any advice or recommendation in this Content is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of securities which may be referred to in this Content and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain securities.