Retail spending in the U.S. increased in October despite continuing high inflationary rates.
Key Details
- During October, retail sales increased about 1.3% compared to the previous month.
- Consumers spent more on necessities such as gas and groceries, but they also spent more on larger items like cars and furniture.
- Some of the spending boost comes from consumers buying construction material to make repairs following Hurricane Ian.
Why it’s news
Despite persistent inflation, buyers still have the ability to spend. The job market also remains relatively positive, even with increased layoffs in the tech sector.
Discounts are also coming earlier this year ahead of holiday shopping, resulting in buyers snatching up deals when they find them. This could result in less spending during the months closer to Christmas.
The uptick in spending seems contradictory to the Federal Reserve’s attempts to slow the overall economy. The Fed has aggressively raised interest rates, yet consumer demand and a tight labor market remain.
Some areas of retail—like electronics—saw a major boost during the pandemic. Now, these categories are beginning to slow. Consumers have increased spending on high ticket items like furniture and going out to eat at restaurants.
These unusual spending habits could be partially explained by a buildup of savings since the pandemic. Some consumers were able to save money when stimulus checks and other relief aides were distributed. However, these savings could soon be running thin.
Major retailers have seen mixed results when it comes to consumer spending. Target, for instance, saw shoppers cut back on spending in the last few weeks—and reported very low earnings today. Walmart, however, saw its sales rise during the same time period.
The Home Depot also saw an increase, although smaller than Walmart’s. Home Depot and other home improvement stores could also see a boost as homeowners choose to renovate rather than buy new homes.
