Retail sales were flat in September as inflation moderated

A sales associate helps a potential customer while laptops are on display at a Costco warehouse on August 15, 2022 in Sheridan, Colo. U.S. retail sales rose an unexpected 0.3% last month after falling 0.4% in July, the Commerce Department said Thursday. (David Zalubowski, Associated Press)

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NEW YORK – The pace of U.S. retail sales was unchanged in September from August as rents and food prices sapped money available for other things.

Retail sales were flat last month, down from a revised 0.4% increase in August, the Commerce Department reported on Friday. Retail sales fell 0.4% in July.

Excluding car sales and gas sales, retail sales rose 0.3%. Excluding gas sales, expenses increased by 0.1%

While the report shows the resilience of the American consumer, unlike many other government reports, the numbers are not adjusted for inflation. In fact, grocery store sales rose 0.4%, helped by higher food prices.

Evidence that the Fed is struggling to cool the economy can also be seen, particularly with big-ticket items. Sales at auto dealers fell 0.4% last month, and shoppers continued to pull back on appliances, electronics and furniture, all categories that performed well early in the pandemic. Business at consumer electronics and home appliance stores fell 0.8%.

According to analysts, sales at clothing stores increased by 0.5%, and business at department stores increased by 1.3%. Business at restaurants rose 0.5%, while online sales grew at the same pace.

Neil Saunders, managing director of GlobalData Retail, said the report was “representative of a tightening economy and a shopper who is more careful and cautious about what they buy”.

Consumer spending accounts for about 70% of US economic activity, and Americans have largely held steady despite inflation hitting a four-decade high. However, rising prices for everything from mortgages to rents have raised anxiety levels. Overall spending slowed and shifted more toward necessities like food, while spending on electronics, furniture, new clothes, and other non-essential goods declined.

Joel Rampoldt, managing director of retail at AlixPartners, said: “Even if people get a job and look comfortable enough on paper, they don’t feel comfortable and they’re very worried about what’s next.”

U.S. inflation accelerated in September, with housing and other needs putting more pressure on households, dampening wage growth and virtually guaranteeing the Federal Reserve will continue to raise interest rates aggressively.

Excluding volatile food and energy costs, consumer prices rose 6.6% in September from a year ago – the fastest such pace in four decades. And month-on-month core prices rose exactly 0.6% for the second time, defying expectations of a slowdown and signaling that repeated Fed rate hikes have yet to ease inflationary pressures. Core prices usually provide a better picture of underlying price trends.

Overall prices rose 8.2% in September from a year earlier, slightly lower than in August, the government said in its monthly inflation report on Thursday.

Accounting for an average of 20% of the industry’s annual sales, the holiday is a crucial period for retailers as they prepare for the shopping season. Inflation is already changing shoppers’ habits, causing them to switch to cheaper stores like Walmart and dollar stores and cheaper brands in the aisles.

Walmart and Target are among those pushing deals earlier, while others are offering new financing for customers.

Conn’s HomePlus, a Texas furniture and mattress chain serving low-income households, has launched a new relocation program targeting the 20% to 25% of the chain’s applicants who are ineligible for other financing.

“(Shoppers’) discretionary spending power is more limited than ever before,” said CEO Chandra Holt. Sales of items such as luxury coffee makers and other consumer electronics declined, he said.

Many holiday forecasts from various research and consulting firms point to a slowdown in sales from last year, but adjusted for inflation, retailers may actually see a decline. AlixPartners estimates that holiday sales are up 4% to 7% from last year, up 16%. The National Retail Federation, the nation’s largest retail trade group, has not released a holiday forecast.

Janet Barnes, 42, of College Park, Maryland, says that as prices rise, she bargains and goes to cheaper stores for groceries. Instead of Wegmans or Whole Foods, he now goes to discount chain Lidl, where he says he saves about 40% on groceries. Thrift stores have replaced Nordstrom, he said.

“We are creatures of habit,” Barnes said. “But it’s not a bad thing to see what else happens and try something else.”

Contribution: Chris Rugaber


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