Department of Commerce and NRF report slight gains in October retail sales

Experts say relatively low sequential gains are spurred by changes in inventory planning

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Even though many themes regarding the economy remain in flux, retail sales turned in decent performances in October, according to data released this week by the United States Department of Commerce and the National Retail Federation (NRF).

Commerce reported that October retail sales hit $397.7 billion, which was up 0.5 percent from September and up 7.2 percent compared to October 2010 along with showing annual growth for the fifth straight month. And it added that total retail sales from August through October were up 7.6 percent annually.

And the NRF reported that October retail sales were up 0.7 percent from September and up 4.7 percent from last year. NRF officials said that the increase in October was paced by consumers making discretionary purchases and portend potential good signs for continued increased in consumer spending in November and December.

“October retail sales support the assertion that consumers have a distinct desire to spend, bolstering hopes for solid sales growth in November and December,” said Jack Kleinhenz, Chief Economist, NRF, in a statement. “This momentum bodes well for this holiday season.” 

Even though retail sales again were up, many industry experts still maintain that evidence of growth is needed over a longer period of time, considering that consumer spending represents about 70 percent of U.S. economic activity.

And as LM has reported, in conjunction with flat or minimally growing retail sales is an ostensible stalling in freight growth to a certain degree as evidenced by recent reports from the American Trucking Associations and Cass Information Systems. Reports in recent months from both concerns show that freight growth is in a holding pattern brought on by high fuel prices, a crippled housing market, and lack of meaningful job growth, among other factors.

With a recent lull in fuel prices there still remains a distinct possibility that retail sales will remain at current levels in the coming months. Freight volumes, specifically on the trucking side, are displaying volumes that are still well below pre-recession levels.

What’s more, what is driving the economy more than retail spending-which generates about 70 percent of economic activity-is industrial growth, according to FTR Associates Senior Consultant Larry Gross.

“From a freight standpoint, that is a great thing,” said Gross. “Previously, consumer-led recoveries were paced by improvements in services and consumer goods, with freight tonnage growth lagging GDP growth, whereas the opposite is true this time.”

A major driver being these relatively slight sequential retail sales increases is that with relatively flat retail spending occurring to a large degree, retailers are postponing their commitments and are waiting until the economic outlook becomes clearer, while they are risking stock outages by having very lean inventories.
Tommy Barnes, president of Con-way Multimodal, told LM that he agreed with that assessment, explaining that low inventory levels are at the core of current retail spending trends and data.

“That is what it boils down to,” said Barnes. “The underlying signs in the economy are scary but nobody is ready to hit the panic button either. All of the signs out there show that we are still in a holding pattern to a large degree.”

In October, the NRF said that projected 2011 holiday spending—defined by the NRF as sales in the months of November and December—are expected to be average.
NRF officials said that 2011 retail sales will be up 2.8 percent over 2010, coming in at $465.6 billion. This expected growth pales in comparison to the 5.2 percent annual increase in 2009 over 2009.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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