Retail sales barely up in October

Most of the major retailers that report same-store sales growth have reported their October sales figures.  The aggregate result is that same-store sales were up a very meager 1.6% relative to last year’s October.  Same-store sales compare the sales at a store relative to that exact same store’s figure one year-prior.  Without the same-store sales number any new stores that were opened in the past year would simply just be adding to the total sales figure and would artificially inflate the numbers.  Does this make sense?

Analysis: I have said it many times before but it bears repeating now: the U.S. economy grows at about 3-5% when it is in its normal expansion mode.  Of that gross domestic product growth, typically consumer spending makes up 70% of the total.  Consumer spending is directed at a large number of retail outlets, but many of those dollars are directed at familiar brands, such as Target, Kohl’s, The Limited, etc.

We all know these brands and we all know that they are a large portion of disposable income spending.  So for that collection of retailers to collectively only report sales up 1.6% means that consumers are still gun-shy.  This means that GDP for the first month of the final quarter of 2010 is likely weak.  Certainly retail sales are not high enough to drive the kind of economic growth that would lead to new business hiring.

Lastly, I wanted to point out that the all-critical Holiday shopping season kicks off traditionally in the month of November.  The quality (i.e. sales not massively at a discount) and quantity of those sales will say a lot about whether the U.S. consumer is shedding her and his funk.

Importance grade: 7; while retail sales are important, consumers have been spending at a rate greater than 1.6% on consumer electronics, appliances and automobiles.  It seems that the U.S. consumer has shifted his/her shopping behavior from retailers to more essential goods.  This is a good thing.  Therefore, the retail sales figure isn’t nearly as important as it used to be.

Jason