Retail sales are growing faster than expected in October, even though inflation is pushing up prices

Shoppers search for clothing at Uniqlo Retail Clothing Company November 12, 2021 in New York City.

Robert Nickelsberg | Getty pictures

US buyers accelerated consumption levels in October, although commodity prices rose at the fastest pace since the 1990s, the Commerce Department reported on Tuesday.

Retail sales, a measure of how much consumers spent on goods ranging from cars to sports equipment and food and gas, increased 1[ads1].7% for October, compared with 0.8% last month.

Exclusive cars also increased sales by 1.7%, according to the Census Bureau’s preliminary estimate.

The two figures were above the Dow Jones estimates of 1.5% for the headline and 1% for the core sales gain.

E-commerce gave the largest relative gain for the month, with an increase of 4% and good for a 10.2% gain from a year ago. High prices at the pump pushed up petrol sales by 3.9% in October. Year over year, the increase in sales at the stations has increased by 46.8%.

The news comes after the consumer price index, which measures a similar shopping basket, increased 0.9% for October and 6.2% year over year. This increase from year to year was the strongest since 1991. Even without food and energy, the CPI was up 0.6% from the previous month and 4.6% year over year.

But retail sales figures – which are adjusted for seasonal variations but not for inflation – indicate that consumers are willing to pay the higher prices, despite a recent indication that sentiment is at its lowest level in 10 years.

“So much for soft consumer confidence that signals slower growth; what people do is much more important than what they say,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.

U.S. households have been flush with cash, thanks to a series of payments Congress approved to combat the pandemic crisis. The expenses amounted to more than 5 trillion dollars and included transfer payments in the form of direct checks to millions of Americans, as well as improved unemployment benefits, most of which expired in September.

The savings amounted to 1.6 trillion dollars in the third quarter, well outside the pandemic, but still at a high level. However, concerns about inflation have crept up in sentiment surveys.

However, spending has remained rapid, with debt and credit card disbursements up 27% on a two-year basis, according to Bank of America.

Overall, sales are up 16.3% on an annual basis.

Electronics and appliances also rose significantly, up 3.8% for the month, while various retailers and building materials centers rose by 2.8% each, and retailers of motor vehicles and parts then saw an increase of 1.8%.

However, sales at restaurants and bars were flat for the month despite an increase of 29.3% year over year, and clothing stores fell 0.7% but were still up 25.8% from the same time in 2020.

A separate report on Tuesday from the Ministry of Labor showed that import prices rose 1.2% in October, ahead of the Dow Jones estimate of 1% and the fastest increase since May. It was well ahead of the 0.4% increase in September.

Industrial production also rose 1.6% in October, ahead of the estimate of 1% and a recovery from the decline of 1.3% in September. And capacity utilization rose to 76.4%, the highest level since December 2019.

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