Consumer Spending Bodes Well for US Holiday Season

16 November 2006

WASHINGTON, DC: US consumers loyally did their bit for the nation's retail businesses - if not for its monumental trade imbalance, according to the October trading data from the Commerce Department.

Excluding gas stations, which were bruised by falling fuel prices, sales at food and retail outlets rose to a seasonally adjusted $332 billion(€259.13bn; £175.23bn), up 0.4% on September and 6.5% year-on-year.

The trends were uneven, with higher spending at restaurants and drugstores helping to offset declines in sales of housing-related goods, such as building materials and furniture. Aggregated retail sales slipped 0.2% from September, but were up 4.5% from a year earlier.

The report implies that consumer purchases, which comprise over two-thirds of the US economy, are decelerating slightly, although falling home sales aren't yet seriously affecting spending in other sectors.

Comments John Shin, senior economist at Lehman Brothers: "The positive income effects from the labor market are at the moment outweighing the negative wealth impact from the housing market. While we're still very concerned about the housing market, we don't see the impact of that kicking in just yet."

Data sourced from Wall Street Journal Online; additional content by WARC staff, 16 November 2006