US retail sales went up higher than expected last October despite higher prices of goods. Despite the highest rate of increase in prices since the 1990s, Americans still took out their wallets. As a result, US retail sales increased by 1.7% for October.
US Retail Sales Went Higher by 1.7% In October
US retail sales, or how much Americans spent on goods such as food, fuel, and items, increased by 1.7% in October. In contrast, September only posted a modest 0.8% increase.
Excluding automobile purchases, US retail sales still went up 1.7%. These numbers exceeded both estimates made by Dow Jones, which are 1.5% for total US retail sales and 1% for retail sales without automobile purchases.
Online shopping continues to act as a driving force during the pandemic. It rose 4% during October, which pushes the total gain to 10.2% compared to numbers from a year ago.
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High prices of gasoline and other fuel boosted sales to 3.9% in October. Year over year, gas purchases went up 46.8%.
US Retail Spending Up Even As Prices Go Up
Surprisingly, the increase in US retail spending comes even as the Consumer Price Index posted a gain of 0.9% for October.
This means a total 6.2% gain year over year for the CPI and is the highest since 1991. Removing food and energy, the CPI remains high at 0.6% from the previous month and 4.6% year over year.
What does this all mean? The higher retail sales numbers suggest that American consumers seem willing to pay higher prices.
This is despite recent reports that say that consumer confidence remains its lowest in the last 10 years. Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said that this time, what Americans said and did were different. “So much for soft consumer confidence signaling slower growth; what people do is much more important than what they say,” he added.
Americans Still Have Cash On Hand
US households remain flush with cash, thanks to multiple stimulus payments from Congress-approved programs. Families not only received stimulus money but also enhanced unemployment money.
In addition, many households also received rent assistance and school debt relief. Spending totaled more than $5 trillion, with most getting directly mailed to American households.
Meanwhile, savings totaled $1.6 trillion in the third quarter. This is lower compared to the pandemic peak but still higher than normal.
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But then again, inflation concerns haunt many families and prevent them from going overboard.
Spending Remains High Despite Inflation Fears
Spending remains a brisk activity for Americans. Debit and credit card outlays posted a 27% gain on a two-year basis, according to Bank of America. Overall, sales went up by 16.3% year on year.
Headlining the gainers were electronics and appliances, which went up by 3.8%. Miscellaneous retail and building materials gained 2.8%, while auto and auto parts jumped by 1.8%.
The notable non-movers were restaurant and bar sales. The industry posted flat numbers despite a nearly 30% rise in spending year-over-year. Clothing also fell 0.7% despite going up 25.8% compared to a year ago.
Meanwhile, the Labor Department reported that import prices rose 1.2% in October. This is higher than the 1% Dow Jones estimate.
It also represented the fastest increase since May. In comparison, import prices only went up by 0.4% last September.
Watch the CNBC Television video reporting US retail sales to jump 1.7% in October, beats 1.5% estimate:
What do you think is the reason why US retail sales continue to go up despite higher prices?
Let us know what you think about increased spending by Americans. Share your comments in the comments section below.