Government shut down? What government shutdown?
Retail sales numbers released Wednesday by the U.S. Commerce Department showed that American consumers increased their spending in October. This came despite a federal government shutdown that lasted 16 days and brought many government services to a halt.
“Maybe the rhetoric was just a little bit overblown in terms of the magnitude of the economic impact behind the partial government shutdown,” Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, N.C., told BusinessWeek.
“As we get ready to go into the holiday shopping season, this is welcome news.”
It’s difficult to overestimate the importance of holiday shopping sales numbers. Consumer spending drives about 70% of the growth in the American economy, and sales during the period between Thanksgiving and Christmas often make up as much as a quarter of annual profits for some businesses.
The .4% increase in spending in October was the highest increase in three months. The Commerce Department’s estimate for retail and food services sales – $428.1 billion – was also 3.9% higher than October 2012.
Some economists speculate that lower fuel costs, coupled with rising stock and home prices, are giving consumers the confidence to buy more.
All this could be good news for business students, particularly those with plans on entering the retail sector.
The Commerce Department reported that automobile sales were up 10.6% in October over a year ago, although it was up only 1.3% over September. Overall, auto makers remain on track to have the best year since 2007, selling more than 15 million cars. In American, both General Motors and Ford Motor Company reported sales gains in October.
Both building materials and supplies dealers (down 1.9%) and gasoline stations showed declines in sales in October, the latter due to falling gasoline prices.
Depending on the retailer, the results varied widely.
For example, J.C Penney missed projections for its most recent quarter’s profit. However, in November, store sales have been strong leading up to Black Friday and the official start of the holiday shopping season. In reaction, the share price for J.C. Penney’s jumped by 9% earlier this week.
Macy’s, the nation’s second-largest department store chain, reported that its third quarter profits rose 22% over the same period last year. On the other hand, Lowe’s has faced issues, with its profits falling below Wall Street projects. That’s something that would likely have been passed over by Wall Street, but Lowe’s competitor Home Depot posted strong gains.
