Retail Sales Show Surprising Strength, Raising Holiday Hopes

Setting an upbeat tone for the approaching holiday season, retail sales in October continued the momentum that was seen in the prior month, according to a report by MasterCard Advisors' SpendingPulse.

Woman shopping for clothes
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Woman shopping for clothes

"Demand is picking up a bit," said Mike Berry, SpendingPulse's director of industry research.

"It seemed that over the summer consumer wallets were pointing more to services, travel, and things like that," he said. "It's encouraging—especially heading into the holidays—to see them pointed back to retail categories."

The SpendingPulse findings, which reflect a broad swath of retail activity—tracking spending in the MasterCard payment networks and estimating other payment forms such as cash and checks—showed sales gains in apparel, luxury goods, and online sales.

Investors will get a better look at how many individual retailers fared when the group issues their monthly sales reports on Wednesday and Thursday. On average, analysts are expecting those companies to show a 1.6 percent increase at stores open at least a year, according to Thomson Reuters.

One encouraging trend was that apparel sales were healthy in October, with nice gains in children's, teen, and women's apparel. Sales of men's apparel remained flat with the year-ago period.

Although clothing sales for teens rose 11.6 percent, the category faced a relatively weak period last year, making those comparisons easy. Children's apparel sales climbed 8.7 percent, while women's clothing sales rose 5.3 percent.

Women have been shopping cautiously, opting to spend their limited dollars on their children, and retail analysts were waiting to see when women would come back to the stores and shop. This may suggest that consumers are feeling a bit more comfortable about their financial situation.

Although favorable weather may have had a positive impact on the group, the gains were the most significant seen since March.

Jewelry sales also posted gains, with sales of high-end jewelry up 5.8 percent and costume jewelry sales up 2.1 percent. Mid-priced jewelry sales rose 2.1 percent.

But sales of consumer electronics took bit of a breather, perhaps in anticipation of the steep price discounts that come along with the holidays. Walmart , for example, just announced it will be cutting prices this weekend for select consumer electronics items, including Sony PlayStation's new Move motion-control component.

Sales of electronics fell 1.9 percent from last year, with particular weakness in appliance sales, which had benefited from stimulus spending in the year-earlier period.

Luxury spending rose 4.2 percent, showing continued traction, a trend likely to help high-end retailers such as Saks, Neiman Marcus and Nordstrom.

Meanwhile, online sales continue chugging along, logging a 7.9 percent gain in October.

Overall, October tends not to be a significant month for retail sales, as consumers slow spending in anticipation of holiday shopping. That may make these sales gains all the more significant.

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