Retail sales were flat in October, hurt in part by a drop in auto sales

NEW YORK (AP) — Sales at U.S. retailers and restaurants were unchanged in October from September as consumers moderated their spending amid concerns about higher prices and other economic uncertainties after splurging over the summer.

But a major factor dragging down the figure was a 1.6% drop in sales at motor vehicle and auto parts dealerships, hurt by the expiration of federal government subsidies that reduced demand for battery-electric cars. Excluding that category, retail sales rose 0.4%, the Commerce Department said Tuesday in a report delayed more than a month due to the 43-day government shutdown.

Steady overall spending in October was lower than economists expected and followed a revised 0.1% increase in September, the agency said. Retail sales rose 0.6% in July and August and 1% in June.

The federal government is gradually catching up with economic reports that were postponed by the shutdown.

“October’s retail sales report was a bust, but the underlying details offer more encouraging signs for (fourth-quarter) consumer spending and a strong starting point for the critical two-month period for holiday sales,” Wells Fargo economist Tim Quinlan wrote Tuesday.

Still, Quinlan said other data suggests some slowdown through mid-December and leaves the company cautious about how the consumer crosses the finish line.

Government retail sales figures, which are not adjusted for inflation, show Americans remained selective in October as many households struggled with high food prices, rent and many imported goods hit by tariffs.

The latest jobs report, released Tuesday by the Department of Labor, also paints a sour jobs picture.

The retail sales report covers about a third of consumer spending, with the rest going to services such as travel, haircuts and entertainment.

Sales at clothing and accessories stores rose 0.9%, while business at furniture and home goods stores rose 2.3%, likely due to rising prices due to tariff costs. Most of the furniture is made in China.

Online retailers saw sales increase by 1.8%, while department stores saw business increase by 4.9%.

But the restaurant business, the only service component within the Census Bureau report and a barometer of discretionary spending, posted a sales decline of 0.4%.

The report comes as retailers are preparing for crowds of last-minute shoppers with extended hours and intensified deals for the final stretch of holiday shopping before Dec. 25.

Hiring has been generally weak, while the unemployment rate has risen, which could hurt consumer spending and the broader economy. The latest jobs report showed the United States gained 64,000 decent jobs in November but lost 105,000 in October as federal workers left after cuts by the Trump administration.

The unemployment rate rose to 4.6%, the highest since 2021.

Despite significant uncertainty, the holiday shopping season is off to a strong start with shoppers focusing on deals, according to data from the Black Friday weekend. But spending has not been uniform across the board.

Retailers’ third-quarter results released last month have been mixed. Walmart, the country’s largest retailer, posted strong sales as it attracts shoppers across a broad income spectrum who are drawn to its low prices. TJX Cos., which operates stores with names like TJ Maxx and Marshalls, has seen an influx of shoppers looking for a treasure hunt experience.

But Home Depot has seen slower spending as shoppers focus on small home projects, while Target, grappling with weak sales, is trying to revive its reputation as a place for affordable but stylish fashion and home goods.

The National Retail Federation, the country’s largest trade group, still expects sales during November and December to increase between 3.7% and 4.2%, compared to last year.

Retailers recorded $976 billion in holiday sales last year, or a 4.3% increase from the previous year, the group said.

But spending trends by income continue to show a K-shaped pattern, with higher-income Americans prospering with their rising wages and wealth, while the bottom points to lower-income households struggling with weaker income gains and rising prices.

Based on spending by its banking and credit card customers, the Bank of America Institute found that high-income shoppers increased spending by 2.6% in November compared to the same period a year earlier, while low-income groups lagged behind with an increase of just 0.6% compared to a year earlier.

“Near full employment has continued to support broad-based consumer demand,” Claire Li, vice president of credit strategy at Moody’s Rating, wrote in a report released earlier this month. “But slowing hiring, cooling wage increases and rising affordability pressures are eroding household consumption growth.”