Strong Holiday Shopping Obscured by Auto and Housing Weakness in October Retail Sales

U.S. retail sales were essentially flat in October, but the headline figure concealed underlying consumer strength as Americans began their holiday shopping before Halloween.

Retail and food service sales totaled $732.6 billion in October, virtually unchanged from September, the Census Bureau reported Tuesday. The stagnant headline masked divergent trends, with weakness concentrated in automobiles and housing-related categories while traditional retail showed surprising vigor.

Motor vehicle sales fell 1.6 percent in October but remain 1.2 percent above last year’s level.

Sales at building materials and garden centers declined 0.9 percent and are down 4.5 percent from a year earlier. Furniture and home furnishing stores showed year-over-year weakness of 3.0 percent, though they posted a 2.3 percent monthly gain as mortgage rates declined from recent highs.

Gas station sales dipped 0.8 percent as fuel prices fell.

Stripping out automobiles and gasoline—two volatile categories—revealed the underlying consumer demand. Sales excluding both rose 0.5 percent for the month, suggesting Americans retained spending power even as they pulled back on big-ticket purchases.

Traditional retail categories associated with holiday shopping showed surprising strength. Department stores posted a 4.9 percent monthly increase, the strongest gain in the entire report and a notable reversal for a sector that has struggled for years. Compared with the year ago, department store sales are up 4.6 percent Sporting goods, hobby, musical instrument and book stores rose 1.9 percent for the month and were up 4.6 percent from October 2024.

Online shopping continued its steady advance, with nonstore retailers up 1.8 percent monthly and 9.0 percent annually.

The strength in discretionary categories suggests consumers entered the holiday season with confidence, potentially front-loading purchases ahead of the traditional November-December rush. Food services and drinking places fell 0.4 percent monthly and rose 4.1 percent annually, another indicator of consumer willingness to spend beyond necessities.

The housing-related weakness reflects the continued impact of elevated mortgage rates on both home sales and the renovation spending that typically accompanies homeownership changes. The furniture and home furnishings uptick in October, coinciding with a period of declining mortgage rates, reinforces the connection between these retail categories and housing market conditions.

Year-over-year comparisons showed broad-based gains. Total retail sales rose 3.5 percent from October 2024, while the three-month period from August through October was up 4.2 percent from the same period last year.

Grocery store sales rose 0.3 percent for the month and were up 2.7 percent from a year earlier. Health and personal care stores declined 0.6 percent monthly but remained 5.7 percent above year-ago levels.

The report comes as the Federal Reserve weighs whether the economy requires further interest rate adjustments. The data presents a nuanced picture: discretionary spending strength that doesn’t suggest economic overheating, combined with weakness in rate-sensitive sectors that reflects monetary policy constraining demand.

The retail sales figures are adjusted for seasonality but not inflation.