WASHINGTON – Many Americans have a darker outlook on the economy as inflation has worsened.
Yet, so far, they don’t seem less willing to spend freely at retailers – an encouraging sign for the crucial holiday shopping season.
Buoyed by strong hires, healthy wage gains and substantial savings resulting in part from government stimulus checks and other reliefs, Americans increased their spending in retail and online stores last month.
Some of the increase reflected the impact of the price hike, and there were signs Americans started looking for cheaper options.
Still, the October gain the government announced on Tuesday was strong enough that most economists expected holiday purchases to jump a record high this year.
The data also illustrates a key factor behind supply chain safeguards that have left dozens of ships waiting to be unloaded at U.S. ports: Americans are buying a huge amount of goods, from home appliances to electronics on the way. by the furniture.
Retail and foodservice sales increased 16.3% from a year ago. This is a record without counting several months in the spring, when federal stimulus checks spurred large increases in spending.
From September to October, retail sales jumped 1.7%, the US Department of Commerce said on Tuesday. This was the largest month-over-month increase since March, up from a 0.8% increase from August to September.
The increase has come just as retailers face a host of challenges. Many have had to dramatically increase wages to find and keep workers, thus increasing their labor costs. And some scramble amid crowded supply chains to keep their shelves well stocked.
“Even with all of these issues, we’re still on track here for a banner year,” said Tim Quinlan, economist at Wells Fargo.
After adjusting for inflation, Quinlan estimates retail sales in November and December will be 10% higher than a year earlier, which would be the biggest such gain in seven years.
Last month, sales soared 3.8% at electronics and appliance stores and 4% at online retailers. These increases suggest that many Americans are already shopping for the holidays, perhaps to avoid higher prices and supply shortages as the holidays approach.
Tuesday’s retail sales figures are unadjusted for inflation, which rose 0.9% in October, the government said. In some categories, such as gasoline station sales, higher gasoline prices accounted for almost all of the gain. Gas sales rose 3.9% in October, while gas prices, before seasonal adjustment, rose 3.7% that month, according to the government’s inflation report.
Yet two major retailers reported a sharp increase in sales on Tuesday, another sign that high prices are not deterring many consumers from spending. Walmart and Home Depot reported rising sales and strong profits, although costs rose for both companies due to supply chain disruptions. Walmart said its consolidated gross margin was affected primarily due to increased supply chain costs.
Analysts will be watching the results of other major retailers like Target and Macy’s later this week for further clues as to how inflation is affecting buying habits.
There are signs, however, that rising inflation is starting to affect the buying habits of some consumers. Walmart executives said grocery sales rose sharply in the fall, in part reflecting purchases by some shoppers who had been stung by rising prices elsewhere. Customer traffic increased 5.7%.
In October, the government said restaurant and bar sales were flat, even though restaurant prices rose the most sharply last month since 1981. Data from online reservation service OpenTable shows consumers are returning slowly in restaurants. The two trends combined suggest that Americans are eating in cheaper places, Quinlan said.
Behind healthy retail spending are strong hires, big pay rises, and good savings for many people. Most households with children received monthly child tax credit payments from the Biden administration. Wages and salaries jumped in the July-September quarter, compared to a year earlier, the highest in 20 years.
Yet inflation has eroded those gains for most Americans. Prices jumped 6.2% in October from a year earlier, the government said on Wednesday, the highest in 31 years.
Neil Saunders, managing director of GlobalData Retail, said he believes many Americans are determined to spend what it takes for fun as they make up for the celebrations lost a year ago.
“This suggests that the retail sector will be able to withstand the impact of rising prices… at least in the short term,” Saunders noted. If inflation remains high, he said, it could undermine growth next year.