US Retail Sales Increase Even As Delta Runs Wild

Despite the continued threat of COVID-19, specifically its resistant Delta strain, US retail sales improved in August. Americans seemed unmindful of the virus and spent more on clothing, furniture, and groceries.

In fact, retail sales exceeded expectations dramatically. Instead of a 0.8% drop as predicted by experts, US retail sales went up by 0.7% in August. 

RELATED: Retail Sales Expected to Show Record Increase for May 2020

US Retail Sales Expanded Even As Experts Expected It to Contract

Broken down into specifics, furniture store sales led the increase by 3.7%. Groceries increased by 2.1% while apparel sales improved by 0.1%. In addition, online sales grew along with retail, registering a 5.3% increase during the month.

The rise in retail sales helped the economy breathe a sigh of relief. Heading into the crucial holiday and winter season, American consumers remained upbeat.

The optimistic buying attitude means that even with the increase in the number of people affected by a coronavirus, many still find it business as usual. 

Rise in Online Sales Means A Drop in Outdoor Activities

Even with the promising numbers, economists are looking into the underlying situation. Experts noted that the rise in online shopping activity meant that a lot of Americans are staying home and foregoing outdoor economic activities.

Michael Pierce, Capital Economics senior US economist, sees COVID-19 still playing the spoiler. “The breakdown was far less positive, with the rise in online and grocery store spending, which contrasts with stagnant spending at bars and restaurants and suggests Delta fears are playing a key role,” said Michael Pearce, senior US economist at Capital Economics.

In fact, restaurant and bar sales posted flat sales in August. Many outlet reopenings had to reconsider their plans as the delta variant continued to record cases. 

In addition, automobile sales posted a decline in retail sales, recording a 3.6% loss. If you remove the car and car parts sales in the overall US retail sales, the numbers will show a 1.8% increase instead of 0.7%. 

It didn’t help that the US automobile industry is dealing with chip shortages for its new cars. Add in shutdowns due to COVID-19 and you’ll see why production slowed significantly.

This led to a higher demand for used cars, which jacked up prices. Now. economists are banking on an increase in car sales after Hurricane Ida. Many car owners will go buy replacement cars for vehicles damaged by the storm. 

Americans Expected To Spend Heavily During the Holidays

Despite misgivings on the pandemic, analysts are expecting Americans to spend lavishly in the coming Holiday season. Gus Faucher, a PNC Financial chief economist, says that many remain in a spending mood.

Shoppers “still have cash on hand. We have more jobs in the economy. Everything still looks pretty good for consumer spending, particularly in the near term,” he said. As a result, “Consumers will be spending a lot.”

As a result of the optimistic retail sales numbers, many experts foresee government economists will adjust forecasts for the rest of the year.

Ian Shepherdson, a chief economist at Pantheon Macroeconomics, thinks it’ll continue until the end of the year.  “Upside surprises on this scale don't come often, and this one indicates a real degree of resilience on the part of consumers,” he said.

Deloitte forecasts an increase of 9% for holiday retail sales this year while e-commerce will jump by 15%. Vaccination rates and elevated household savings rates will drive holiday sales.

Retailers Getting Ready for the Holidays

In anticipation, retailers are scrambling to ensure adequate stocks for the holiday season.  These early, many retailers are warning shoppers that supply chain disruption and hiring difficulties can factor into play.

Many items will sport higher price tags as shipping costs increase. In addition, retail worker wages went up as well.  

Despite the warning, Americans expect flood retail stores. Walmart CEO Doug McMillon foresees pent-up spending will spill over beginning Thanksgiving.

“We're going to see strong demand through the rest of this year. I think customers, families want to celebrate Christmas. They want to have a Thanksgiving,” he said. 

Watch the Bloomberg Markets & Finance video reporting that US retail sales unexpectedly rise in August:

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Do you agree that retail sales will continue to increase this holiday season even with COVID-19 still in full swing? Or, do you see the opposite, where more Americans will hold back on spending as the situation worsens?

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