U.S. consumer activity decelerated in October

October retail sales data pointed to a downshift in the pace of consumer spending.

December 4, 2020 – October retail sales (excluding auto sales) rose 0.3 percentage points from September’s level to a 4.4 percent year-over-year (YoY) growth rate. Non-store (e-commerce) sales remained robust in October and are up 26.3 percent YoY. Gasoline sales and clothing sales were down 13.7 and 11.3 percent, respectively, reflecting the ongoing pandemic effects on these sectors of more people working from home. Control group sales* pointed towards a much slower pace of consumer spending to start Q4.

Stimulus effects continued to support nominal disposable income growth, which rose 6.9 percent above last year’s level. The all-important wage and salary component returned to positive territory for the first time since the trough of the recession in April, rising 0.5 percent YoY. The saving rate remained elevated, at 14.3 percent.

Nominal consumer spending accelerated again in September, rising 1.4 percent from the prior month. Nominal spending continued to slowly inch towards recovery, with total spending down 0.6 percent on a YoY basis. The recovery in consumer spending remained unequal across spending categories—goods purchases were up 8.2 percent YoY verses services spending, which remained down (4.6 percent) relative to last year’s levels.

“October retail sales data pointed towards a downshift in the pace of consumer spending,” said Michael Brown, Principal U.S. Economist. “While income growth remains robust, due in part to continued stimulus effects, nominal consumer spending remains well below pre-pandemic growth rates.”

“After a strong September, consumer price growth, consumer confidence, and job growth all took a slight step backward in October,” said Travis Clark, Associate U.S. Economist. “New spikes in COVID cases and the lack of a new stimulus package have impeded the rebound in confidence.”

Highlights:

  • Consumer spending remained unequal: goods purchases were up while services spending was down relative to last year’s levels.
  • After rising for three consecutive months YoY, consumer price growth slowed.
  • Consumer confidence was down slightly: confidence increased among most income groups, but dropped significantly in households making under $15,000.

Retail sales excluding auto sales (YoY percent change)

Line chart showing U.S. retail sales for autos. See retail sales image description.

Line chart showing U.S. retail sales excluding autos, ranging from 6.2% year-over-year in October 2018, to reach a low of -16.6% in April of this year and back up to 4.5% as of October 2020.

Consumer Confidence Index (Index, 1985=100)

Line chart showing the U.S. Consumer Confidence Index. See Consumer Confidence image description.

Line chart showing the U.S. Consumer Confidence Index, ranging from 137.9 in October 2018 to a low of 85.7 in April of this year and 100.9 as of October.

There are two horizontal orange lines in both the retail sales and Consumer Confidence images that represent the normal range of each measure for the prior expansion, defined as one standard deviation above and below the average change from July 2009 to February 2020.

*The control group within retail sales is defined as total retail sales excluding food services, gas stations, autos and building materials sales.

Sources: Visa Business and Economic Insights, U.S. Department of Commerce and Conference Board

Labor market recovery faces headwinds, as COVID cases spike

After three consecutive months of consumer prices rising on a YoY basis, consumer price growth slowed to 1.2 percent YoY from 1.4 percent in September. Used cars and trucks had the highest level of growth of all spending categories on a YoY basis for the second consecutive month, increasing 11.5 percent from last year. Consumer confidence was revised slightly downward, from 101.9 to 101.3 in September. October’s confidence reading fell slightly to 100.9. Future expectations fell 4.5 points from September, while consumers’ view of the present situation rose 5.7 points. While most income groups reported an increase in confidence, households making under $15,000 had a 26.1 point drop month-over-month (MoM) in October as negotiations over a second stimulus bill faltered.

September’s job gains were revised up to 672,000 from the originally reported 661,000 jobs, which made October’s job gains of 638,000 a deceleration in job growth of 44,000 MoM. New spikes in COVID cases and airline layoffs slowed net hiring and have left the labor market 10.1 million jobs below the pre-COVID peak in February. The unemployment rate decreased 1 percentage point in October, finishing the month at 6.9 percent.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are generally identified by words such as “outlook,” “forecast,” “projected,” “could,” “expects,” “will” and other similar expressions. Examples of such forward-looking statements include, but are not limited to, statements we make about Visa’s business, economic outlooks, population expansion and analyses.  All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in our filings with the U.S. Securities and Exchange Commission (SEC). Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise.

Disclaimer

Studies, survey results, research, recommendations, opportunity assessments, claims, etc. (the ‘Statements’) should be considered directional only. The Statements should not be relied upon for marketing, legal, regulatory or other advice. The Statements should be independently evaluated in light of your specific business needs and any applicable laws and regulations. Visa is not responsible for your use of the Statements, including errors of any kind, or any assumptions or conclusions you might draw from their use.