Yes, retail sales climbed 0.4% in October, the Census Bureau announced this morning. Core retail sales, a measure that excludes volatile automotive sales as well as sales from gasoline stations, rose 0.5% for the month. (Motor vehicles sales were up 1.3% in October but gasoline sales fell 0.6%.) Economists had expected a miniscule 0.1% growth in core retail sales for the month.
Why were expectations so low? Economists feared that the government shutdown in October had savaged consumer spending. That, clearly, turned out not to be the case.
The faster-than-expected growth came from sectors where the improved trend might last for a while -- clothing (1.4%) and sporting goods/hobby stores (1.6%) -- and from sectors that probably got a boost from one-time factors. Electronics and appliance sales gained 1.4% in the month. At least some of that was a bump from the release of the newest iPhone by Apple (AAPL).
But notice what this stronger-than-expected growth really adds up to as a longer-term trend: The economy is continuing to grow, but the pace of that growth is slow. In this environment, retail sales aren't falling off a cliff, but the growth rate is slow enough to fill many retailers with trepidation as they face the critical holiday selling season that begins on the Friday after Thanksgiving, or Black Friday. (It's called Black Friday because, traditionally, it marks the date on the calendar when many retailers move into the black for the year.)
Or that used to begin on the Friday after Thanksgiving.
In a clear response to worries about holiday sales, some big retailers are opening their stores on Thanksgiving night while the turkey is still warm on the table. Best Buy (BBY), for example, will open its stores at 6 p.m. Thursday night. Wal-Mart (WMT) will not only be open Thursday, but has announced big sales events for 6 p.m. and 8 p.m. The company has also said that for the week before Thanksgiving it will match the Black Friday prices of Best Buy, Target (TGT), and Toys R Us.
Not to be left out of the "price guarantee" wars, Best Buy said on Nov. 19 that it would match competitors' prices. When Best Buy CFO Sharon McCollam noted that day in the company's earnings conference call that the guarantee would "have a negative impact on our gross margins," the stock sold off by 11%. (Is it a surprise that a guarantee to match the prices of a Wal-Mart might eat into margins at Best Buy?)
Not all retailers are facing the same kinds of holiday shopping season pressures as Best Buy or Wal-Mart. For the third quarter, same-store sales at Best Buy gained just 0.3% compared with the third quarter of 2012. Last week, Wal-Mart forecast a tough holiday shopping season.
But I believe it is safe to say that while retail sales growth for October was better than expected, it was by no means strong enough to lift all retail boats.