Overall sales are returning to traditional growth levels, but brick-and-mortar stores are struggling.

By Manuel Gutierrez, Consulting Economist to NKBA
 

Retail sales were virtually flat in October, rising by only  0.3% for the month, compared to a much brisker 1.4% average growth for the preceding three months. While this might indicate that consumers are pulling back on their purchases, that’s not the case.

October’s 0.3% gains are in line with monthly averages seen for the two years prior to the pandemic. The sharp increases in the months after the April sales collapse were simply part of the process of catching up to traditional monthly growth, signaling that rates were likely a return to normalcy.

Retail sales reached $553 billion in October, their highest value ever. Sales were actually 5.7% above the same month from last year.

Vehicles & Service Parts, which also include automobiles and pick-up trucks, topped the list in retail spending, capturing 21%, or 1 in 5 sales dollars.  Consumers spent $115 billion for Vehicles & Services Parts in October, up 0.4% from the previous month.

Internet & Mail Order, at $88 billion, translated into 16% of October sales. The category is closing the gap on Vehicles, registering a strong 3.1% gain for the month.

Sales at traditional brick-and-mortar stores, the four category bars at the bottom of the chart below, continue to lose share. While they jointly represented 15% of all retail sales in 2000, and 10% a decade ago, they have dropped to just  6% of the total today.

An important category for the remodeling businesses, Building Materials, remains a strong component with 7% of total retail sales. This category rose nearly 1% in October, three times higher than the 0.3% overall sales growth. The 1% gain is second only to Internetsales. This partly reflects the continuing strength of home remodeling.

Building Materials sales reached their highest level ever in October, registering $38 billion in sales, up a whopping 20% from a year ago. This is more than three times overall annual sales growth, and twice the growth of any other category with the exception of Internet sales, where volume was 29% higher than last year.

The lifestyle changes mandated by government restrictions, which have resulted in consumers spending more time at home either for work, school or entertainment, suggest further robust spending for home improvements in the near future.