The Commerce Department said Wednesday retail sales jumped 1.3% in October as Americans shelled out for food, gas, and big-ticket items last month despite inflationary pressures. Economists surveyed by Bloomberg expected a headline increase of 1.0% after activity was flat during the prior month.
A strong print may derail the market’s uptrend, with investors likely to interpret robust spending as a sign to Federal Reserve policymakers that aggressive rate increases can continue.
All eyes were on Target (TGT) as it plunged 13% following a third-quarter earnings report that came in off by a wide margin and weak guidance for the holiday quarter. The retailer was pressured by a slowdown in consumer spending on discretionary merchandise and said store looting reduced its gross profit margin by $400 million so far this year.
This marks the second straight month of retail sales growth above 1.0%, with the prior month’s figure being revised up to 1.6%. Excluding the volatile categories of automobiles, gasoline, and building materials, so-called core retail sales increased 0.9% last month.
The headline number was driven by a 2.0% increase in sales at gasoline stations, which economists say is likely due to higher prices at the pump. Food and beverage stores saw sales increase 1.1%, while sales at general merchandise stores were up 1.0%.
Sales at non-store retailers, which include online sellers, jumped 1.4% last month.
The strong retail sales report comes as inflationary pressures have begun to build in the economy. The Consumer Price Index rose 0.3% in October, driven by increases in the cost of gas, housing, and healthcare.
The Fed has been monitoring inflation closely as it decides how to proceed with interest rates. The central bank raised rates in December for the first time in nearly a decade, and it has signaled that it plans to raise rates three more times in 2017.
With retail sales showing no signs of slowing down, the Fed is likely to stay on course with its plans to raise rates, which could roil the stock market.
This article was created by Artificial Intelligence PRAI.co