WASHINGTON (AP) — Many Americans have taken a darker view of the economy as inflation has worsened. Yet so far, they appear no less willing to spend freely at retailers — an encouraging sign for the crucial holiday shopping season.
Buoyed by solid hiring, healthy pay gains and substantial savings stemming in part from government stimulus checks and other relief, Americans ramped up their spending at retail stores and online shops last month. Some of the increase reflected the impact of higher prices, and there were signs that Americans have started to seek out cheaper options.
Yet the October gain the government reported Tuesday was solid enough for most economists to anticipate holiday shopping jumping by a record amount this year.
The data also illustrates a key factor behind the supply chain backups that have left dozens of ships waiting to unload at U.S. ports: Americans are buying a tremendous amount of goods, from appliances to electronics to furniture. Retail and food service sales have surged 16.3% compared with a year ago. That is a record high excluding several months during the spring when federal stimulus checks caused sharp spikes in spending.
From September to October, retail sales jumped 1.7%, the U.S. Commerce Department said Tuesday. That was the biggest month-to-month gain since March and was up from a 0.8% increase from August to September.
The increase occurred just as retailers face a host of challenges. Many have had to sharply raise pay to find and keep workers, thereby increasing their labor costs. And some are scrambling amid overwhelmed supply chains to keep their shelves stocked.
“Even with all these problems, we’re still on track here for a banner year,” said Tim Quinlan, an economist at Wells Fargo.
After adjusting for inflation, Quinlan estimates that 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% among online retailers. Those increases suggested that many Americans are already doing their holiday shopping, possibly to avoid higher prices and supply shortages closer to the holidays.
Tuesday’s retail sales figures aren’t adjusted for inflation, which rose 0.9% in October, the government said. In some categories, such as gas station sales, a jump in gas prices accounted for nearly all 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.
Still, two major retailers reported robust sales increases Tuesday, another sign that high prices aren’t deterring many consumers from spending. Walmart and Home Depot reported rising sales and solid profits, although costs rose for both companies because of supply chain disruptions. Walmart said its consolidated gross profit rate took a hit primarily because of increased supply chain costs.
Analysts will be monitoring earnings results from other major retailers like Target and Macy’s later this week for further clues about how inflation is affecting shopping habits.
There are signs, though, that rising inflation is starting to affect some consumers’ shopping patterns. Walmart executives said that grocery sales rose sharply in the fall, partly a reflection of purchases by some shoppers who had been stung by rising prices elsewhere. Customer traffic rose 5.7%.
In October, the government said sales at restaurants and bars were flat, even though restaurant prices surged last month by the most since 1981. Data from the OpenTable online reservation service indicates that consumers are slowly returning to restaurants. Both trends combined suggests that Americans are eating out at cheaper places, Quinlan said.
Behind the healthy retail spending are solid hiring, strong pay raises and healthy savings for many people. Most households with children have been receiving monthly payments from the Biden administration’s child tax credit. Wages and salaries jumped in the July-September quarter, compared with a year earlier, by the most in 20 years.
Still, inflation has eroded those gains for most Americans. Prices jumped 6.2% in October from a year earlier, the government said Wednesday, the most in 31 years.
Neil Saunders, managing director of GlobalData Retail, said he thinks many Americans are determined to spend what it takes to enjoy themselves as they make up for lost celebrations from a year ago.
“This suggests that the retail sector will be able to weather the impact of higher prices … at least in the near term,” Saunders noted. If inflation stays high, he said, it could undermine growth next year.
D’Innocenzio reported from New York.