Retail: Inflation Takes a Bite Out of Strong Sales
Kiplinger’s latest forecast on retail sales and consumer spending
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Retail sales surged 1.9% in October as consumers heeded advice to shop early for the holidays because of anticipated shortages. Slowing COVID-19 infections also helped by making shoppers feel more comfortable going out to stores. But rising prices meant that volumes rose less than dollar sales. Gas stations sold fewer gallons despite a strong rise in sales measured in dollars. Likewise, furniture and home furnishing sales volumes declined despite a dollar increase, and rising prices hid a restaurant traffic decline.
Despite rising prices, sales volumes strengthened in most categories. E-commerce was the big winner in October, jumping 4%. Also seeing significant volume pickups were electronics and appliances, building materials and department stores.
Motor vehicle sales rose for the second month after a four-month drop. While this is encouraging, the semiconductor shortage that has hindered new car production is far from over.
Holiday sales should rise 14% from last year’s level. Again, some of the pickup will be the result of higher prices instead of larger volumes. Retail sales excluding gasoline should rise by 18% this year. All this spending is likely to help boost yearly GDP growth to around 6%.
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