WASHINGTON (Businesshala) – US retail sales soared in October as Americans eagerly began their holiday shopping early, to avoid empty shelves amid shortages of some goods due to the ongoing pandemic, in the early fourth quarter The economy was given a lift.
A solid report from the Commerce Department on Tuesday suggested that high inflation is yet to dampen spending, even as concerns about rising cost of living dented consumer sentiment to a 10-year low in early November. level sent. Growth in household wealth, driven by a strong stock market and home prices, as well as huge savings and wage gains, appears to be cushioning consumers against the highest annual inflation in three decades.
“It’s more important to look at what consumers do than what they say,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “They’re worried about high inflation, but they’re still in good shape and continuing to spend.”
After rising 0.8% in September, retail sales jumped 1.7% last month, the biggest gain since March. It was the third consecutive monthly advance and topped economists’ expectations for growth of 1.4%. Sales in October grew 16.3 per cent year-on-year, up 21.4 per cent from pre-pandemic levels.
Several of America’s top retailers this week marked an earlier start to holiday shopping. While this could lead to declines in November and December, economists and retailers expect holiday sales this year to be the best in a while.
“Today’s data shows consumers are getting a jump in their holiday shopping,” said Matthew Shay, president of the National Retail Federation in Washington. “We urge consumers to shop early and shop safely, and we fully expect this holiday season to be one for the record books.”
Retail sales are mostly made up of goods, with services including healthcare, education and hotel accommodation, making up the remainder of consumer spending. The nearly two-year-long COVID-19 pandemic has resulted in severe labor shortages, leading to delays in the delivery of raw materials to factories as well as shipments of finished goods to markets.
The broader increase in sales in October partly reflected higher prices as monthly consumer inflation rose 0.9% in October, pushing the annual rate up to 6.2%.
Stocks on Wall Street were trading higher on data as well as Walmart forecast a strong holiday quarter. The dollar rose against a basket of currencies. US Treasury prices fell.
Sales of motor vehicles were led by a 1.8% increase in receipts at auto dealerships after a 1.2% increase in September. The increase reflects the first increase in unit sales in six months, as well as higher prices. The tight supply of automobiles due to global semiconductor shortages is driving up prices.
Sales at service stations increased by 3.9%, fueled by more expensive gasoline. Online retail sales jumped 4.0%. Receipts at building material shops grew by 2.8%. Receipts also increased at furniture stores as well as sporting goods, hobby, musical instrument and bookstores. Electronics and appliance stores sales grew 3.8 percent.
But sales at clothing stores fell 0.7%. Sales across restaurants and bars remained unchanged despite a decline in COVID-19 infections driven by the Delta variant. Restaurants and bars are the only service category in the Retail Sales report. These sales were up 29.3% from last October.
Economists speculated that either high inflation was forcing consumers to cut back on eating out or that spending was permanently shifted in favor of goods.
Andrew Hollenhorst, chief US economist at Citigroup in New York, said: “If services spending recovers substantially, strong demand for goods increasingly appears to be a temporary COVID-related consequence rather than a structural shift in consumer preferences.” “
Excluding automobiles, gasoline, building materials and food services, retail sales rose 1.6% last month after rising 0.5% in September. These so-called core retail sales correspond most closely to the consumer spending component of GDP. Adjusting for inflation, retail sales are up about 5% annualized above the third quarter average.
Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 1.7% rate last quarter. Economists at JPMorgan raised their fourth-quarter GDP growth forecast for a 4% pace to 5%. Goldman Sachs raised its estimate by 0.5 percent to 5.0%. The economy grew at 2% in the third quarter.
A separate Federal Reserve report on Tuesday brightened the economic picture, showing manufacturing output rose 1.2% last month to its highest level since March 2019, falling 0.7% in September.
“The economy has overcome whatever sluggishness it may have in the summer, and it is growing quite strongly,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.
Businesses are also making steady progress, compensating for depleted inventory, which should help keep factories humming and support the economy. Trade inventories rose 0.7% in September, a third report from the Commerce Department showed.