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Home Commerce

US Retail Sales Continue To Boom Despite The Threatening Inflation

Contributor by Contributor
September 28, 2022
in Commerce, Featured
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The revised data for July show that the core retail sales increased by 0.4% and not the 0.8 % reported earlier.  Thus, the decline in sales witnessed before July seems to have ended. According to the august and September data, the demand for goods increased despite the resilient inflation. Purchases increased by 0.3%, with the sale of most commodities except gasoline going up by 0.8%.

The strong growth in Retail Sales is attributed to the resilient labor market. Also, there are no severe layoffs reported despite the rising inflation. However, economists believe the resilience witnessed in the labor market is cosmetic. They argue that companies are hoarding workers and do not want to lose them following the difficulties in hiring witnessed in 2021 during the Covid pandemic.

Note that towards the end of July, the economy had 11.2 million job openings, translating into 2 jobs for every unemployed individual. Thus, the tightening of the monetary policy has not impacted the labor market. However, there are signs that the manufacturing industry is feeling the pinch since the factory production figures have remained the same. According to the august report, the production at the factories did not increase. However, the report from Philadelphia Fed shows that the mid-Atlantic region factory figures experienced some decline.

 In New York, the report shows that manufacturing increased steadily in August. But according to the US chief economist Rubeela Faroogi, factory activities in NY are likely to remain moderate because of the contracting demand due to a rising interest rate.

Overall, retail sales rose steadily in august despite the rising inflation. The rebound in the August sales figure is due to an increase in motor vehicle purchases and the desire to dine out often following a fall in gasoline prices. The September figures show that the Fed’s action to increase interest rates is moderating the demand.

Thus, consumer spending remains persistent due to the strong labor market. According to reports, fewer new people filed unemployment claims in the third week of September. The recorded figure was the lowest in the last month.

Also, increases in the consumer price index in august suggest the economy is stable. So, the Fed will likely unleash another interest rate hike to try to nib inflation in the bud. Also, there are no signs of recession, which further convinces the fed to take stringent measures to control inflation.

Some of the activities that may have influenced the increase in sales include back-to-school shopping, spending on general merchandise, and car sales. Also, the reprieve in gasoline prices increased spending on essential items. Here are more details.

General Merchandise

The sale of clothes and general merchandise increased while furniture store receipts dropped by 1.3%. Also, the sale of garden equipment increased by 1.1%, while the sale of appliances dipped by 0.1%. Book stores, musical instruments, and hobby stores all experienced increased sales. Also, receipts from bars and restaurants went up by 1.1%.

Sale Of Stocks

The sale of stocks dipped while the dollar remained steady against the world currencies. Also, the US treasury prices fell following the increase in interest rates.

Sale Of Evs And Second-Hand Cars

In August, the sale of EVs went up by 60 %. The increase was associated with the rise in the number of charging stations. Also, shoppers have discovered the immense benefits of electric vehicles. It made the sale of cars shoot by 60% in the first quarter of the year. Also, the number of second-hand cars sold in September went up. Notably, the sale of second-hand vehicles between 3 -5 years old increased by 2.8%.

Final Thoughts

Although rising inflation is believed to hamper spending, it is difficult to explain what is happening in the economy. Economists believe that the increases in sales are attributed to a robust labor market. However, there are fears that if inflation is not controlled, employees will start agitating for high pay to help them cope with the rising inflation.

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