New York—Inflation is pushing prices higher, but that didn’t spook shoppers in October as U.S. monthly retail sales surpassed expectations.
Sales were up 1.7 percent month-over-month in October to $638.2 billion, according to data from the U.S. Department of Commerce, while year-over-year sales were up 16 percent.
The results exceeded analyst expectations of a month-over-month increase of 1.5 percent.
September sales were stronger than previously thought, up 0.8 percent month-over-month, rather than the previous 0.7 percent, as per the revised figures.
“Retail sales data for October reflects the enduring strength of consumers’ finances and willingness to spend as the holiday season gets underway,” said National Retail Federation President and CEO Matthew Shay.
“The robust balance sheets of American households are being met by retailer preparation and hard work to provide products that consumers want at competitive prices.”
Shay noted a list of challenges facing retailers, including supply chain issues, labor shortages, rising inflation and the pending vaccine mandate, but applauded retailers for striving to safely serve customers in stores and online.
Last year, the NRF encouraged shoppers to start checking off their holiday gift lists early
, and the push for early shopping has continued this year, particularly in the wake of supply constraints.
“Today’s numbers show that consumers are getting a jump on their holiday shopping. We continue to urge consumers to shop early and shop safely, and we fully expect this holiday season to be one for the record books,” said Shay.
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Halloween spending and early holiday shopping may have boosted numbers, said NRF Chief Economist Jack Kleinhenz, but most of the shopping will still be done in November and December.
“The big question, obviously, is whether much of the planned holiday buying is being done early and December sales will suffer, or if this confidence and buying power will sustain strong growth throughout the entire season,” said Dave Bruno, director of retail market insights at retail technology company Aptos.
“Retailers will need to be very strategic with their messaging, promotions and offers if they hope to reduce the risk of a late-season slowdown. Carefully timed and targeted offers must be combined with incentives and discounts on alternatives to out-of-stock items and flexible omnichannel strategies that evolve as COVID case counts fluctuate. This will give retailers the best chance to sustain strong growth into the new year.”
While concerns about high prices have been weighing on consumer sentiment, it hasn’t hindered spending, NRF’s Kleinhenz noted.
was on a three-month consecutive decline until a rebound in October, despite analyst expectations of another decline.
Concerns about the Delta variant, which had weighed on sentiment, have eased somewhat, though inflation remains high.
The consumer price index, which measures the average change in prices over time that consumers will pay for a basket of goods and services, rose nearly 1 percent month-over-month in October and more than 6 percent year-over-year, marking the highest jump since 1991.
Gas prices surged, up nearly 4 percent for the month and 47 percent year-over-year.
Despite rising costs due to inflation and low consumer sentiment, consumers have kept spending, due in part to a high level of savings following the series of payments approved by Congress.
In the third quarter, personal savings totaled $1.6 trillion, according to the Bureau of Economic Analysis
, with a personal saving rate of nearly 9 percent.
Though not as high as the record 34 percent seen in April 2020, the personal saving rate is still at a high level compared with pre-pandemic levels.
A shrinking savings rate indicates that people are spending again rather than continuing to save, and economist Maria Solovieva expects some of that to be spent this holiday season, as per her research at TD Economics
“Our forecast assumes that between 5 percent and 10 percent of the $2.7 trillion in excess saving accumulated to-date will be spent by the end of 2023,” wrote Solovieva.
However, a rise in COVID-19 infections could put the brakes on holiday spending, warned NRF’s Kleinhenz.
The NRF also calculates retail sales, excluding auto sales, gas stations, and restaurants.
Its calculations show October retail sales were up 1.7 percent seasonally adjusted from September, and up 11 percent unadjusted year-over-year.
For the first ten months of the year, sales were up 14.1 percent over the same period in 2020.
The results are in line with its revised forecast that 2021 retail sales should grow between 10.5 and 13.5 percent over 2020 to between $4.44 trillion and $4.56 trillion.
October sales were up in all but two categories— clothing and clothing accessory stores and health and personal care stores—on a monthly basis.
Year-over-year, sales were up across the board, led by increased sales at electronics and appliance stores and sporting goods stores.