Hurricane Sandy, the tragic storm that struck the East Coast with savage fury just over two weeks ago, also took a toll on retail activity for the month of October. The resultant drop in such spending will clearly have an impact on the nation's fourth-quarter gross domestic product.
Specifically, retail spending, which surged by an upwardly revised 1.3% in September, fell by 0.3% in October. Expectations had been for a lesser drop of 0.2% in the latest month. If we back out the auto component from the aggregate mix, to get the so-called core rate of retailing activity, we find that such sales were unchanged for the month.
The Commerce Department, in issuing the data, noted that the storm had both a positive and a negative effect on the data. For example, some stores noted a decline in such activity because the storm damage caused them to either close temporarily or permanently. Some establishments also reported fewer customers as many storm victims and potential shoppers had other things on their minds, notably the cleanup and the paucity of gasoline in many areas.
A few retailers, though, saw sales get a boost, as shoppers stocked up on emergency items in anticipation of the storm and in its aftermath.
As to individual components, the October result noted that sales of building materials and garden supplies plunged by 1.9%. Sales also fell by 1.5% at auto and parts dealers. However, spending rose nicely at gasoline stations and at food and beverage stores.
Meantime, some suggest that retail activity in November will get a boost, as the cleanup from the storm proceeds. However, with the jobless rate in many locales likely to go up in the hurricane's wake and with many homeless taking a hit to their net worth unless fully insured, the positive impact on spending may initially be hard to quantify. Overall, we sense that GDP will be adversely affected in the current quarter, as the storm could force growth down from a heretofore expected 2.0% rate to one closer to 1.3%. We think some offset will be seen in the first and possibly the second quarters of 2013, as the nation undergoes storm-related rebuilding.
On the whole, however, this was a disappointing report and one that could well presage a less-than-stellar holiday shopping season up ahead.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.