Retail Sales Gain Despite Inflation

Consumers Shrug off Rising Prices

Consumers continued to spend last month in spite of high prices. October retail sales climbed 1.7%, which track household spending on an array of goods including food, gas, and apparel. This follows a 0.8% increase in September. Excluding vehicles, core sales were up 1.6% month-over-month. Economists were expecting retail sales to increase 1.5% in October and core sales to be up 1%.

The jump in consumer spending comes in spite of rising inflation, which just hit a 30-year high. Meanwhile, consumer sentiment fell to a 10-year low in November. The increase in retail sales indicates that consumers are still spending even though prices are high and optimism about the economy is low.

Savings Rate Still High

Ecommerce led the charge in October, with online sales increasing 4% month-over-month and 10.2% compared to last year. Sales at the nation’s grocery stores were up 1.1%, while sales at bars and restaurants remained flat. Due to soaring prices at gas pumps, gasoline sales were up 3.9% last month and 46.8% year-over-year.

Consumers are flush with cash thanks to pandemic stimulus and shutdowns which enabled them to curb expenses and reduce debt. As of the third quarter, savings held by US households totaled $1.6 trillion. That is much lower than savings were during the peak of the pandemic, but it is still elevated.

Walmart Prepares for a Strong Holiday Season

Consumer spending does not appear to be slowing down heading toward the busy holiday season. Walmart’s earnings report gave Wall Street more information about consumer habits recently. For its third quarter, Walmart (WMT) reported a 9.2% rise in comparable sales. Meanwhile, foot traffic in Walmart locations was up 5.7%, and Walmart said spending per trip increased 3.3% year-over-year.

Walmart raised prices earlier in the quarter to take advantage of demand for early holiday shopping. So far this strategy seems to have paid off. Walmart expects sales to stay strong both online and in stores. For this reason, the nation’s largest retailer said it boosted inventory by 11.5% to be ready for the holidays. In spite of inflation, consumer spending has remained strong and many expect this trend to continue.

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