The U.S. Commerce Department reported Tuesday that retail and food-services sales advanced 0.3% in October to $553.3 billion, missing expectations for a 0.5% increase. Last month's rise follows a 1.6% increase in September.
On a monthly basis, excluding auto sales (which because of their high ticket price can result in volatile monthly readings), retail sales were up 0.2%, also missing expectations for a 0.6% monthly gain. Excluding autos and gas, sales were also up 0.2% in October, again below projections for a 0.6% advance.
Core retail sales (i.e., retail sales excluding receipts from auto dealers, building materials retailers, gas stations, office supply stores, mobile homes and tobacco stores) were down 0.1% in October, missing expectations for a 0.5% advance. While this group is not considered to have as big an impact on trading as the headline number unless there is significant deviation from expectations, we note the results because it is also what is known as the "control" group and is closely associated with personal consumption expenditure (PCE), which is a large portion of the gross domestic product (GDP).
Digging deeper, the report also shows:
- Clothing and clothing accessory stores sales: -4.2% MoM and -12.6% YoY
- Department Stores sales: -4.6% MoM and -11.9% YoY
- Sporting goods, hobby, musical instrument & book stores sales: -4.2% MoM and +12.4% YoY
- Motor vehicle & parts dealers sales: +0.4% MoM and +10.7% YoY
- Food services & drinking places sales: -0.1% MoM and -14.2% YoY
- General-merchandise stores sales: -1.1% MoM and +2.5% YoY
- Health & personal care stores sales: -0.1% MoM and +3.8% YoY
- Gas stations sales: +0.4% MoM and -14.0% YoY
- Miscellaneous store retailers sales: -0.9% MoM and +1.7% YoY
- Building material & garden equipment & supplies dealers sales: +0.9% MoM and +19.5% YoY
- Furniture & home furniture stores sales: -0.4% MoM and +5.2% YoY
- Non-store retailers (i.e., e-commerce) sales: +3.1% MoM and +29.1% YoY
- Grocery store sales: -0.4% MoM and +9.2% YoY
- Food & beverage stores sales: -0.2% MoM and +10.3% YoY
- Electronics & appliance stores sales: +1.2% MoM and -3.9% YoY
All in all, this was not the strongest reading and one that we believe is contributing to today's market action as it serves as a reminder that while we may be close on a vaccine, we are looking at a cold hard winter before it becomes widely available -- both on the health side as well as the economic impact. As a result, we reaffirm our view that a barbell strategy, providing us exposure to both the "at-home" and "reopening" trade coupled with a robust cash position (which we rebuilt as the market roared higher post-election) at around 13% is the best way to navigate the current market environment.